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Claim bankruptcy and keep your home, or should you sell your property?

Bankruptcy is a confusing and complex process, with so many different things to consider.

On the surface, it may seem like an easy way to get a fresh start with your debts being written off. But underneath it all there’s much MUCH more to it…

If bankruptcy is something you’re considering, you will need to know what exactly bankruptcy is, how to claim bankruptcy and whether or not you can claim bankruptcy and keep your home – questions which we have the answers to!

We will also talk you through what your other options are when it comes to your property, including whether it may be a better decision to sell your property to pay off your debts.

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want to sell your house fast & avoid bankruptcy?

What is bankruptcy and how does it work?

Bankruptcy is a type of insolvency which you can file for when you’re in serious financial difficulty.

After you’ve been declared bankrupt, your creditors will write off your unsecured debts. This allows you to make a fresh start.

However, although on the surface this may sound like a good path to take, bankruptcy can affect different areas of your life, for example your job or your assets.

The assets you own, such as your car or home, are usually sold to pay off debts.

If your assets are worth more than your debts, or you have regular payments which you’re up to date on and you can afford to keep paying them, then bankruptcy isn’t the best option for you.

Bankruptcy usually lasts for 12 months, and you’ll be quite restricted financially as to what you can do during this period.

When your bankruptcy ends, you’ll be ‘discharged’ from it.

If you go bankrupt you may find it difficult to take out any credit, as bankruptcy will stay on your credit file for six years.

Bankruptcy is even more complicated if the property is jointly owned.

What do you not get to keep when you are in bankruptcy?

When declaring bankruptcy, this can mean you will lose some of your belongings, as your bankruptcy trustee can sell them and give the money made from the sale to your creditors.

When you file for bankruptcy, all your belongings will become property of the trustee, apart from those which are protected or exempt.

When these assets are passed onto the trustee, this is called being ‘vested’, and you can’t do anything to sell or give them away.

Generally, any car or vehicle that you own will be sold unless they’re protected from the trustee or exempt.

An exempt vehicle would be if they’re essential for work or for caring for a dependant. Another example of why it would be exempt is if you need the vehicle for your basic needs.

If the exempt vehicle is so valuable that selling it would allow a cheaper alternative to be bought, with money left over to give to your creditors, then your bankruptcy trustee may arrange for this.

Any belongings you get during your bankruptcy will also be claimed by your trustee and they will look at selling these items in order to make payments to your creditors.

Normally, you can keep the following items, unless your trustee thinks they can be replaced with a cheaper alternative:

  • Tools, books and other items of equipment that you need to use personally in your job, business or vocation

  • Clothes

  • Bedding

  • Furniture

  • Household equipment

  • Other belongings that are necessary for your basic needs

The below items aren’t needed for your job or business and so will be sold:

  • Antiques

  • Jewellery

  • Leisure equipment, such as games or cameras

  • Caravans

You’re able to challenge a decision to sell something but will need to apply to the court to do this.

Or if you disagree with a valuation of an item, you can get an independent valuation yourself.

For more information on what will happen to your belongings, Citizens Advice will help give you more insight.

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Step by step guide on how to claim bankruptcy

If claiming bankruptcy is something you’re considering, it’s important you know the process of how to claim bankruptcy, to allow you to decide if it’s right for you. We have a ‘step by step’ guide written for you below, to allow you to decide what’s best for you:

STEP 1 – Make sure it’s right for you

First things first, you need to make sure bankruptcy is the right option for you. It can offer you a fresh start if you can’t see a way out of your financial issues, but it can have a serious impact on your day-to-day life.

STEP 2 – Complete the form and pay the fee

To apply for bankruptcy, you need to fill in the online form on the GOV.UK website and pay the fee of £680, which you won’t get back unless you decide to cancel your application.

STEP 3 – Withdraw some money from living costs

There may be a delay of a few days between the bankruptcy order and the official receiver taking control of your money and belongings. However, your bank and building society accounts may be frozen immediately so you won’t be able to access any money, meaning you should take enough money out of your account to cover your costs for a few weeks.

STEP 4 – Submit the application

When you, or the person helping you, has filled in the form, you’ll be asked to confirm; you are the person named on the form; the information provided is accurate and you agree to a credit check.

Any false statements or information not included about a property is a criminal offence and you could be fined or sent to prison, so you need to ensure you give full details.

STEP 5 – Wait for adjudicator’s decision

After you have submitted your application, your adjudicator will have 28 days to make their decision, whether that be they make a bankruptcy order or reject your application.

If your application is rejected, you are able to ask them to review their decision and if they confirm their decision to reject, you can then appeal to the court against the decision.

To request an appeal, you need to submit form N161 to your local court.

STEP 6 – Bankruptcy order made

When the bankruptcy order is made, you will be officially declared bankrupt. Your bank or building society will then be frozen.

STEP 7 – Co-operate with the official receiver

Your money and property will come under control of the official receiver. You’ll hear from them within 2 weeks of the bankruptcy order being made, where they will arrange an interview with you to discuss the bankruptcy.

The official receiver will then oversee the administration of your bankruptcy, either by distributing your money and property between your creditors or overseeing your bankruptcy trustee.

STEP 8 – Open a bank account

You may need to open a new bank account so you can have any earnings or benefits paid in, and you can pay your bills. It’s important to keep in mind some banks may not accept your application for an account due to your bankruptcy.

STEP 9 – Discharge from bankruptcy

Providing you co-operate with the official receiver and trustee; you will be discharged from bankruptcy after a year.

Declaring bankruptcy pros and cons 2023 UK

On the face of it, declaring bankruptcy can seem like an easy way to have your debts written off and getting a fresh start. However, it’s not all as easy as it may sound and with the upsides come the downsides.

We have all the pros and cons of declaring bankruptcy listed here for you, allowing you to work out if it’s something you should consider…


  • The money that you owe will be written off

  • Any court action relating to your debts will be called off

  • You will be able to keep some belongings, if they're exempt goods

  • You will be allowed to keep some of your income, but it will mean you have less money than normal

  • You won't have creditors on your back anymore, meaning there's less pressure on you

  • If you have to make payments from your income, it will only be for 3 years – you won’t have to make payments if your only income is from welfare benefits


  • Your credit rating will be affected for 6 years

  • If you want to take a loan out for more than £500, it’s against the law to not tell the lender you’re bankrupt

  • If you own a home, it may have to be sold – depending on how much it's worth after any amount secured on it are repaid

  • If you rent a home, landlord can end your tenancy

  • You will need to pay the £680 bankruptcy fee

  • Any businesses, cars or luxury items will likely be sold

  • You could lose your job, with some form of employments refusing to employ those who are bankrupt

  • If you have a high income, you will be asked to make debt repayments for 3 years

  • If you own a business, it may be closed down and assets sold

  • It can affect your immigration status

  • Bankruptcy will be published publicly

want to sell your house fast & avoid bankruptcy?

Can you claim bankruptcy and keep your home?

If you own a house, it’s likely you won’t be able to claim bankruptcy and keep your home, as your bankruptcy trustee will probably decide you need to sell the property, with the funds from the house sale going towards your debts.

There are some situations where you may be able to claim bankruptcy and keep your home, and these are as follows:

Children and dependants

If you have anyone under the age of 18, living in your home you may be able to live in your house for a year whilst you arrange alternative living arrangements.

Negative equity

If the market value of your property falls below the amount of house repayments left on it, you may be able to keep your home.

This will be reviewed a couple years after the file for bankruptcy and if the situation remains the same then it’s unlikely the house will ever be sold.

Beneficial interest

You could save your home from being taken if somebody can buy your share, and this is known as beneficial interest.

Or if you have lived with a partner who owns a property in their sole name, you may be entitled to a share of the equity because of the financial contributions you have made to the property.

If the official receiver thinks you have a ‘beneficial interest’ they can ask for the equity to be paid towards the bankruptcy.

Three years passing

Your bankruptcy trustee has three years to decide what to do with your property, and the property can be solely yours and no action can be taken on it after the 3-year period if you haven’t:

  • Applied to court for a changing order

  • Applied to court for an order to leave the property

  • Sold your beneficial interest

  • Managed to pay your beneficial interest

Having said this, you do have the option of selling your property quickly to go towards your debts, without the need to claim for bankruptcy.

This may be a better option for most, as bankruptcy will affect other areas of your life, for example you may not be able to keep your job, or you may be forced to sell your house with nowhere else to go.

Selling your house yourself, instead of filing for bankruptcy, will allow you to find yourself alternative accommodation and will mean your credit rating won’t be affected.

We can help you sell your house FAST for FREE, allowing you to pay off your debts, without the need to file for bankruptcy.

We’re a cash buyer of houses, with over 50 years combined experience and multiple good reviews on Trustpilot, which we feel shows you you’re in safe hands.

On top of giving you a cash offer for your house, we can complete in a fast timescale to suit you and cover all your fees, leaving you with the full amount in your bank to pay off your debts, without the need to file for bankruptcy.

Why not give us a call or fill in our online form today to receive a no-obligation cash offer for your property, allowing you to get on your way to paying off your debts and selling your home, on your terms!

Ready to sell your house fast and pay off your debts?

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Tom Condon

Tom Condon, one of our content writers, has fascinating expertise in sustainability in the property industry. Tom thoroughly understands the market and has experience in both residential and commercial property. He enjoys attending conferences and staying current with the most recent property trends.