10 Myths about bankruptcy

Myth 1 You are blacklisted forever

Not at all.

Firstly there is no such thing as a national black list.

Bankruptcy in the UK lasts for 12 months, providing you follow the rules. The credit reference agencies are informed by the court service that you are a bankrupt, along with any other information that may be in the credit domain, like county court judgements and loan defaults.

Loan defaults, county court judgements and bankruptcy will potentially stay on your credit record for up to 6 years. However credit references agencies simply provide references, they do not make the rules.

Myth 2 I won’t be able to work

Not at all.

You will still be able to work and find employment, although many employers are asking at the job application stage if you have ever been a bankrupt.

There are some jobs you may not be able to continue with, as an example being a company director, a senior manager or employment in financial services.

Ordinarily being a bankrupt shouldn’t and generally doesn’t affect your employment status. However should an employer decide to dismiss you because you have been made a bankrupt, they need to inform you why they have done so: they could be leaving themselves open to an unfair dismissal action if they do.

In the scheme of things, bankruptcy shouldn’t affect your day job or your terms/conditions of employment

Myth 3 Everyone will know I’m a bankrupt

Not at all.

Although it depends who you classify as everyone. Once you have been declared bankrupt, either by your own petition or by someone making you bankrupt, it will appear on the back pages of the classified advertising section in the local press.

However, here’s a question for you. When was the last time you looked in the local press to find the list of recent bankrupts? Exactly. Unless you are a celebrity or public figure, it is extremely unlikely the bankrupt list will ever be noticed, unless you tell everyone you are on it.

Myth 4 I can keep some assets.

Not at all

Anything you own will be taken by the official receiver (OR) and sold/auctioned to pay your creditors, however there are exceptions.

Your personal effects like clothes, furniture, electrical goods are normally left alone.

If you own a high value car which is paid out, you could lose it as it will be worth something at auction: you can still keep a low value car.

Any other assets, like property, land and business interests will be taken over by the OR and sold/auctioned to pay off your creditors.

A matrimonial home is also at risk from disposal by the OR. In some circumstances, where one partner of the marriage has been made bankrupt, but the other has not, and the house is in joint names, then you need a lawyer to put a case together to save the matrimonial home. There is no fixed rules about saving the matrimonial home, ultimately it is an asset and if it has value, then it could well be realized.

In addition, it is your responsibility to inform the OR during your bankruptcy period, should you inherit money, win the lottery or receive money or gifts. Remember, although a bankrupt, your creditors can still get paid by the sale of any of your assets, or from any cash you have been given and it must be declared to the OR.

Even your income must be declared: a proportion of any surplus after your living expenses will be required to be given to the OR to pay your creditors.

Myth 5 I’ll never be able to borrow again

Not at all

After you are discharged from bankruptcy (normally after 12 months in the UK) you can start building up your credit record. It may take a while, perhaps a few years before you are eligible to successfully borrow from banks and loan companies again.

But here’s the thing.

While you are a bankrupt you’ll be living a debt free life, because you will not be able to borrow: STAY THAT WAY!

Promise yourself you will live your life without borrowing. Pay cash for everything and start saving. Remember you went bankrupt because you borrowed and spent everything.

From here on in, pay cash, don’t spend and save, you’ll be amazed how quickly your savings will grow.

Myth 6 I’ll lose my friends

Not at all.

Your real friends will stick with you, anyone else who starts slagging you off and putting you down, well quite simply you are best without them. If you think you had friends when you had money, you’ll find your real friends when you don’t have money.

Myth 7 I can’t travel abroad

Not at all

However you should inform the OR if you are moving abroad, or have been offered work abroad. It is extremely unlikely that your day to day life (apart from having little money) will change. None the less, keep yourself right and keep the OR informed of any changes in your circumstances.

Myth 8 I won’t be able to get a bank account

Not at all.

Despite being a bankrupt, and despite many banks not accepting bankrupts on their books, there are online banks that will offer accounts to bankrupts.

Myth 9 I can’t have a credit card

Not at all.

Although it won’t be a credit card with a credit limit, it can be a “top up” credit card. This is where you prepay cash amounts into your credit card.

Myth 10 I’ll not be able to start a business

Not at all.

You can start a business even when you are a bankrupt, but you must inform the OR what is going on. Remember a business is an asset and any income or profits, after you have taken reasonable living expenses, will be managed by the OR to repay people you owe money to.

You’ll be surprised how many successful business people have gone bankrupt, and flourished in business at a later time.


In conclusion, bankruptcy is a form of protection for you to stop your creditors pursuing you for money you can’t repay. Bankruptcy is a serious business and is not a procedure where you can pick and choose the rules.

If you decide to go bankrupt, get professional legal advice about your assets and finances.

In reality, if you owe more money than you can pay back and your assets are worth less than you paid for them, bankruptcy may well be your only option.