Does bankruptcy last 6 years
- 22 Nov 2021
Many people think bankruptcy will last for 6 years or even longer. This is wrong. It actually only lasts for 1 year (12 months).
Included in this article:
- Your bankruptcy should only last 1 year
- What if you have to make payments towards your debts?
- When does your credit score get better?
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Your bankruptcy should only last 1 year
You may be surprised to learn that if you go bankrupt, it will last for 1 year. After 12 months it comes to an end and you are discharged. After a further 3 months your name is removed from the insolvency register.
Once you are discharged, the bankruptcy restrictions no longer apply to you. If you get a windfall it will be yours to keep (although there are a very few exceptions to this). You can also borrow more than £500 without having to mention about your bankruptcy. You can be a company director if you wish.
It is possible that the one year period could be extended. However, this is rare. It only happens if the official receiver decides to issue a BRU (Bankruptcy Restrictions Undertaking) against you. The time you are under the restrictions of bankruptcy would then increase. The most common extension is 3.5 years.
Most people who go bankrupt do not get a BRU. It might only happen if you owe a significant of debt to HMRC because of unpaid tax. Alternatively if you have tried to hide any of your your assets before going bankrupt.
If you are made bankrupt and refuse to communicate with the Official Receiver, your discharge could be suspended indefinitely. You will only be discharged when you contact them and assist with their investigation of your affairs.
What if you have to make payments towards your debts?
If you have any spare income at the end of the month (after your reasonable living expenses are accounted for), you will be required to pay this towards your debt. It is known as an IPA (Income Payment Agreement).
Not everyone gets an IPA. If you have zero or negative surplus income, you won’t get one. But if you do have spare cash, an IPA is likely. It will last for 3 years but runs separately from your bankruptcy. You will still be discharged after 1 year. But the payments continue for 3 years from when they start.
If your income changes during your IPA, you need to tell the Official Receiver (OR). Your payments could still go up or down even if you are already discharged.
Where you do not have an IPA, your bankruptcy will be over after 1 year. That will be the end of it. The OR is not allowed to ask you to start making payments towards your old debts after that even if your income increases in the future.
Want more advice about whether you will have to pay towards your debt after you go bankrupt? Give us a call (0800 044 3194) or complete the form below for a call back.
When does your credit score get better?
Your credit score is affected by going bankrupt for much longer than the bankruptcy itself. A record is put on your credit file and stays there for 6 years. This has a negative affect on your score.
In other words, if you go bankrupt on 1st Oct 2021, you will be discharged on 1st Oct 2022 (a year later). But the record will remain and continue to affect your credit score until 1st Oct 2027.
Having said that, it is actually possible to start repairing your credit score early. As soon as you are discharged, you can apply for a credit repair credit card. Used sensibly, this will build up a record of responsible credit usage on your file and start to improve your score.
If you do this, you should not have to wait the full 6 years before you can start borrowing again. Within just 2 years you may well find you are accepted for a standard bank account or loan. It may be possible to get car finance from a sub prime lender even sooner. Perhaps immediately after you are discharged.
At the time of writing it will not be possible to get high street mortgage until the record of your bankruptcy has come off your credit file.
I went bankrupt 11 years ago. How do I know I am discharged
Hi Adele
Information about how to confirm you are discharged from bankruptcy and how to get a copy of your discharge certificate can be found by clicking on this link: Confirm you are discharged from bankruptcy
As you went bankrupt before April 2016, the 1st and 3rd sections of the article have the information relevant for you.
I am thinking about going bankrupt but am worried I might have made a preferential payment.
I have a ccj that got a high court writ against me and was very persistent. They were sending enforcement officers every week and eventual got in and placed a writ of control on my sofa, tv and microwave. In order to stop them coming, I have been paying them £50 a month when I haven’t been paying other people. Is this a preferential payment that could lead to a bru?
Hi Julia
You don’t need to worry. Making payments to a bailiff is NOT a preferential payment. It is a legitimate payment to a creditor after enforcement action.
You have nothing to worry about. You are NOT at risk of getting a BRU because of this.
For your info, a typical example of a preferential payment is where someone sells their car for £10k 6 months before going bankrupt and uses the funds to repay £8k they owed to their friend who lent them money rather than sharing the funds between all the creditors.
Making agreed monthly repayments to a creditor or enforcement officer (even when others are not receiving payments) does NOT constitute preferential payment.
Good Afternoon, I got BRU for 3,5 have years restriction. I’m wondering what can I do now? I’m considering cancel that bankruptcy or change it on part bankruptcy. Is that even possible when I got the decision already? Is there something I could do to back to normal. I was under deep depression when I did it. I think I would be able to go to night shift and try to pay it back at least half of that. Pls let me know what can I do and if there’s any option to solve it.
Dear Dawid
Getting a BRU (Bankruptcy Restrictions undertaking) is probably not as bad as you think and certainly no reason to consider cancelling your bankruptcy.
By the way, it is not easy to cancel your bankruptcy unless you have the funds to pay your debt or can make payments of at least £150-£200/mth into an IVA. However, when you read the information below, I don’t think you will need to consider it.
Even though you have been given a 3.5 year BRU, you will still be discharged from the bankruptcy itself after 12 months.
Also, the fact you have the BRU does not have any effect on whether or not you will have to make any payments towards your debts. This is determined by a review of your income and expenses budget. If you have no surplus, you will not have to make further monthly payments regardless of the fact you have a BRU.
Ultimately all a BRU does is just extend some of the restrictions that you are under while you are bankrupt for some extra time (in your case 3.5 years). But it is unlikely this will have any impact on you. The two main extensions are that you can’t be a company director for the extended time. In addition, you can’t borrow more than £500 without first letting the lender know you have a BRU. However, this has little or no impact as your ability to borrow is negatively impacted for 6 years anyway.