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Can I go Bankrupt if I am on Benefits?

Can I go Bankrupt if I am on Benefits?

Are you receiving benefits such as Universal Credit, Tax Credits or ESA? If so, bankruptcy could be an ideal debt solution for you. If you have no other sources of income you will 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 from friends or family to pay for Bankruptcy, you will not normally be able to repay this money until after you are discharged.

Where 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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Comments 112

  1. Philip
    26.02.2018

    I have a debt of just under £2,000 which I can’t afford to pay back . I don’t claim any job seekers allowance or any other benefits and I’m not working as I look after my kids while my partner works part time. I don’t have any money at all. Don’t know how I can pay this debt off as my partner needs all her wage for living costs

    1. 26.02.2018

      Hi Philip

      Your situation sounds similar to that of Charlotte Read above.

      Given you have debts of less than £20k and have little or no income I suggest you consider a Debt Relief Order (DRO). This solution gives you the same outcome as bankruptcy but only costs a one off payment of £90 to implement (compared to the £680 fee to go bankrupt). If you are not a home owner this solution is designed specifically for you.

      You can get a DRO by making an appointment with the debt counsellor at your local CAB (Citizens Advice) or by speaking to the Step Change debt charity.

  2. Daryl
    31.01.2018

    Hi,
    When applying for Bankruptcy whilst on Benefits (ESA) does the EX160 form no longer apply? Is it no longer possible to get part of the fee waived? Will I have to pay the full fee of £680?
    Thanks.

    1. 31.01.2018

      Hi Daryl

      In April 2016 the bankruptcy application process in England and Wales moved online. Given you no longer have to go to the Court there is no “Court Fee” to pay. The EX160 Court Fee Waiver application is therefore no longer applicable to the bankruptcy process. I am afriad everyone now has to pay the full £680 fee whether they are in receipe of benefits or not.

      If you are struggling to get the £680 together there are certain charitable trusts that may be able to help. You can find out more about this in the last section of this page: The cost of Bankruptcy

  3. Sarah
    25.01.2018

    Hi, I am self employed making very little sometimes nothing, claim working tax Credits and child tax Credits. If I go bankrupt will my child maintenance from her father count as income to pay debts off? Thanks

    1. 29.01.2018

      Hi Sarah

      I can confirm that Child Maintenance payments are considered as part of your income. As such if you have any disposable income the Official Receiver is likely to require you to pay this towards your debts for 3 years yes. This rule is confirmed in the Insolvency Service Technical Manual Section 31.7.75.

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ABOUT THE AUTHOR
James Falla
I have been advising people on how to solve their debt problems for over 20 years. During this time I have helped many people go bankrupt. I am an FCA Approved Person and the Managing Director of Wilmott Turner Financial Services (owner and operator of Bankruptcy Expert
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