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Can I go Bankrupt if I am on Benefits?
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Can I go Bankrupt if I am on Benefits?

Can I go Bankrupt if I am on Benefits?

If you receive benefits Bankruptcy may be an ideal debt solution. You may not have to make any further payments towards your debts.

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Is it possible to go Bankrupt if you are on Benefits?

If you are receiving benefits but are struggling with debt you can go Bankrupt. There is nothing to stop you using this solution if you feel it is right for you.

Bankruptcy may actually be a very sensible option for you. The fact that you receive benefits may mean that you are on a low income. As such other solutions such as an IVA which require you to make monthly payments may not be affordable.

If you go Bankrupt and cannot afford to make payments towards your debt you will not have to. The money you owe will be written off after 12 months.

Do you have to pay the Bankruptcy Application Fee if you receive Benefits?

If you want to go Bankrupt you will have to pay the application fee whether you are receiving benefits or not. Despite the fact that you probably have a low income you will not be eligible for any reduction.

In England & Wales the bankruptcy application process moved on line on the 6th April 2016. The fact that you no longer have to visit the Court is seen as a positive step by many.

However the downside is that there is no longer any option to waive part of the fee for those on a low income.

It is possible to pay the bankruptcy application fee in instalments. However you will not be able to submit your application until it is paid in full.

Will you have to make payments towards your Debts?

When you go bankrupt you have to declare all of your income including any benefits. The Official Receiver will then calculate if you can afford to pay towards your debts.

If your only income comes from benefits it is very unlikely you will have to pay anything. This is because you are unlikely to have any surplus income.

Your benefits are set so that you can pay for your reasonable living expenses only. There should be no surplus which can be used to pay for anything else.

You may have other forms of income as well as benefits. In these circumstances your total income is taken into account. If based on this total you can afford to make a payment towards your debts you will have to do so.

How to pay the Bankruptcy Fee if you are on Benefits

Finding the money to pay the Bankruptcy Fee is unlikely to be easy if you are on benefits. However there are some things you can consider which might help.

First can you borrow the money you need? Perhaps a friend or family member can lend you the money. If you have available credit on a card or overdraft you could also use this or borrow from a Payday lender. This is not ideal but you will not be penalised.

If you borrow money to pay for your Bankruptcy this becomes a debt which is then included in the procedure. If you want to repay this money you will normally have to wait until after you are discharged.

If borrowing is not an option then you will have to save. To help you do this you should stop paying the debts which you will include in your Bankruptcy. Instead put this money aside and save it towards the fee.

When you stop paying your creditors will probably start to hassle you and threaten Court action. You should explain that you plan to go bankrupt in the near future and request that your account is put on hold.

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78 thoughts on “Can I go Bankrupt if I am on Benefits?

  1. Richard says:

    Hi James

    I have debts of 6000 I am on universal credit at the moment but I am a home owner. Will bankruptcy affect my mortgage / home?

    1. Hi Richard

      If you are a home owner you should not go bankrupt without calling us to get further advice. If there is equity in your property, bankruptcy will put it at risk. As a homeowner, if your unsecured debt is £6000 you will probably be better off with a debt management plan.

  2. Mark says:

    Hi. My debts from 2009 are around £200K. Im on benefits ESA and PIP Im a social tenant and have a car reg 2006. I paid £600 a year ago but is a very bad conditon hence the price I paid but in the parkers valuation Private Price £735 – £1,045, Dealer Price £1,535 – £1,900 , can I apply for bankrupcy and keep car? Thank you

    1. Hi Mark

      From what you have said it sounds as though bankruptcy is absolutely the right solution for you. Your rented property will not be affected and you will not have to give up any of your benefits.

      You have no need to worry about your car. If you paid £600 for it a year ago it is definitely not worth more than that now. You do not go by the dealer price. I recommend that you go by the price on I am sure this will show a value of less than £1000. If not put in the value of £600. You simply need to explain the condition of the car to the official receiver and they will be more than happy with that.

  3. Bex says:

    Hello, I have a couple of questions. I am currently off sick in receipt of universal credit, about £1,100 a month now as I’ve been signed off now without needing a sick note, mental health problems. I have £26,000 of debt. I was working self employed for Deliveroo on my scooter. I concerned that if I fold for bankruptcy while off sick I might lose my bike, but when I’m ok again that is the work I would return to.

    I don’t think it is worth more than £1000, is it possible They would take my bike since I’m not currently officially using it for work? On this amount of money a month from UC will I have to pay some towards the debt, I currently pay about £17 a month in total. Thankyou.

    1. Hi Bex,

      Given you are not a home owner I would say that bankruptcy is an ideal solution for you. As mentioned in the above article, the official receiver will not to take any of your benefits from you. As such you will not have to make any payments towards your debts while you remain on universal credit. This would only change if during the year you are bankrupt you get back to work and your income becomes greater than your living expenses. However increasing your earnings to this level in your line of work is generally unlikely.

      You do not need to worry about your scooter. If it is worth less than £1000 it is exempt from bankruptcy. Even if it is worth a little more, you would still be able to keep it as it is a tool of your trade. Even though you are not working now due to illness, you will need your bike for work when you recover. As such it would not be taken from you.

  4. Rachael says:

    Im currently in receipt of benefits due to ill health and a very rare form of epilepsy which is severe. My partner has recently been sent to prison for 3yrs and im finding it very difficult to cope with the mounting debts. I suffer with mental health issues and all the letters of enforcement, recovery, CCJ and loosing my home is sending me very close to the edge. Any ideas would be much appreciated.
    Many Thanks

    1. Hi Racheal

      I am sorry to hear about your situation. From what you have said bankruptcy might be a good option for you. If so it will mean all your debt is written off. Non of your benefits will be taken from you and after just 12 months the bankruptcy will be over and you can have a fresh start.

      Whether or not bankruptcy is right for you will depend on a number of things. Two of the main ones are as follows: First are you a home owner or renting? If you are renting then bankruptcy could be sensible. Your landlord would not be told and as long as you maintain your rent, your home will not be at risk.

      Second how much debt do you owe? If the total amount is less than £20,000 you might qualify for a debt relief order. This would give exactly the same outcome as bankruptcy but would be cheaper to implement.

      If you want further advice about your options and would like to speak to me about it please feel free to call. I can be reached on 0800 044 3194.

  5. Colin says:

    Hello James,
    I am currently considering bankruptcy. I have a CCJ for £28K, in my overdraft of £4k per month and have 2 credit cards and a loan of £15K. I am currently unemployed,( previously on a large salary) now on UC and live in a private rental house with my wife and 4 children. I have come to the decision that BK is the right decision since I am never going to pay off all my debts in any reasonable time frame.

    I have checked my tenancy agreement and cannot see any wording stating I will be evicted should I go bankrupt and I don’t own a car. My wife owns the family car as I had a company car before I was made redundant. So I think I have answered my question already but CCJ will be covered in the BK?

    If I start a small sole trader business to supplement the UC, lets face it they don’t give you much to survive on with 4 kids and rent, will the OR look to take any earnings I take from a small sole trader business and setup an IPA?

    1. Hi Colin

      From what you have said I agree bankruptcy sounds like a sensible option for you. The CCJ would certainly be included.

      You should not worry about your rented property. Your landlord will not be told and so as long as you maintain your rent payments there should be no issue whatsoever. Your wife’s car will not be at risk as it is hers not yours.

      Once you are bankrupt you only have to make a payment towards your debt if you have a surplus income. Given you earn sufficient to cover your reasonable living expenses and no more then you would not have to make further payments. Remember if you start to earn money then you need to update DWP and your universal credit may also fall.

  6. Nigel says:


    I’m married but own nothing. I’m on esa and pip.

    I owe about £10,000 to esa for over payment and I owe about £10,000 to Lowell debt recovery. Can I apply for bankruptcy?

    1. Hi Nigel

      You can apply for bankruptcy yes. It sounds as though it would be a sensible option for you. If you go bankrupt all the debt you owe will be written off. This includes the ESA over payment and the debt owed to Lowell (who have purchased the debt from the original creditor).

      Given you are renting and have no assets you have nothing to lose and your wife will not be affected in any way. In addition you will continue to receive your ongoing benefits payments. You will not have to make any further payments towards the debts.

      For more information on how to get started have a look at this article: How to go Bankrupt

  7. Ozzy says:

    Hi I’m on pip mobility,dla and esa and I have 14k debt personal loan (not secure) and credit card,will they take any money from my benefit also when I go bankrupt my account will be freeze so how will get paid my benefit?

    1. Hi Ozzy

      I confirm that if you go bankrupt zero money will be taken from your benefits to repay your debt. You will not have to make any further payments at all. Your debts will be written off. After 12 months you will be discharged and that will be that.

      If your bank account is with a bank you owe money to you will need to open a new basic account with a different bank. You can then use this while you are bankrupt (and after if you wish). All your benefits can be paid into this account no problem. More information on this can be found here: Changing your bank account if you go bankrupt

  8. Kevin says:


    I am on benefit and have £46000 credit card debt.

    Does the trustee or official receiver ask about my benefit statements?

    1. Hi Kevin

      If you are on benefits you will need to declare this and the amount you receive on your bankruptcy application form. The official receiver may ask for copies of your bank statements to prove this is the only income you receive (although this is not always the case).

      Either way if your income is just made up of benefits the OR can’t take any money from you. As such your debts will be written off and after 12 months your bankruptcy will be over. As such given you are not a home owner and your car (if you have one) is worth less than £1000, bankruptcy would seem to be a very good way of resolving your financial problem.

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