Can you leave debt out of bankruptcy
- 24 Dec 2021
Most unsecured debts have to be included if you go bankrupt. This means careful thought is needed if you have joint debts or a guarantor loan.
Included in this article:
- Can you choose to leave debt out of bankruptcy?
- Is it possible to leave out a joint debt or guarantor loan?
- What about money owed to family or friends?
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Can you choose to leave debt out of bankruptcy?
As a general rule, you can’t decide to leave debt out if you go bankrupt. All the unsecured debts you owe have to be included.
Even if you don’t list them all on your application, inclusion is automatic. If you leave one out by mistake or aren’t sure what you owe, it doesn’t matter. Any that you forget or you weren’t even aware of are still included and written off when they come to light.
That said some debts are not included. For example pay monthly mobile phone contracts. You are allowed to keep paying for your mobile phone as normal.
In addition you do not need to worry about utility bill accounts or car insurance you pay monthly. These are not affected.
Secured debts such as mortgage debt or car finance are not included in bankruptcy unless there is a shortfall after repossession.
Can you leave out a joint debt or guarantor loan?
Joint debts or guarantor loans (given they are unsecured) must be included if you go bankrupt. It is not possible to leave them out. Because of this, the joint account holder or guarantor will be left liable for the outstanding debt.
You will therefore have to think very carefully before going bankrupt if you have these types of debts.
If the joint account holder or guarantor is unable to take over the ongoing repayments, the creditor will start collections action against them.
Where the joint account holder or guarantor is your partner, you could both consider going bankrupt. Alternatively they could use a different debt solution more suited to them.
Thinking about going bankrupt but want to leave debt out? Contact us for advice. Call 0800 044 3194 or complete the form below
What about money owed to family or friends?
Money owed to family or friends is one of the few debts that can be left out of bankruptcy.
You may want to exclude these because you don’t want them to know about your circumstances and that you are going bankrupt. Alternatively you may want or need to keep paying them.
The good news is if you don’t list them on your bankruptcy application, they won’t be identified or contacted by the official receiver.
However, once you are bankrupt, you can’t officially continue making payments towards these debts. The official receiver will not allow you to include any money in your living expenses budget to cover the payments. You will need to suspend them until after your bankruptcy is over
You can continue to pay family or friends after your bankruptcy is over. But trying to maintain then while you are bankrupt will be very difficult.
I went bankrupt on 19/03/19 and was discharged on 19/03/20. On my original bankruptcy application I missed some loan debts due to the fact I had so many on there and the stress of the whole saga I simply forgot to include them. Recently, I received a demand of one of these debts which I forgot to include.
Please can confirm that even if everything was not on form at the time and/or complete amounts were missed/or not correct unintentionally that in fact, under insolvency law, everything is included anyway and I would owe nothing. Thereby,these debts/liabilities would have been wiped off and any demands that relate to them I can ignore as long as they happened before entering bankruptcy.
If this is true, then I could just inform them with proof of my bankruptcy dates accordingly?
Hi Keith
You do not need to worry about debts that you missed off your original application form. As per the Insolvency Act (1986) S382, any unsecured debt you owed on the date you went bankrupt is automatically included whether it was listed or not for whatever reason. As such you are not liable to pay such debts
All you need to do is contact the lender in question and confirm that you went bankrupt. It is a good idea to quote your BKT reference number and send them a copy of the bankruptcy order. If you don’t have this, it will still be available to download if you log onto your original application.