Bankruptcy should only be used as a last resort if you believe you have no real chance of ever realistically clearing your debt. When a court declares that you are bankrupt, they will usually take possession of your assets to pay off your outstanding debts. A bankruptcy lasts for about one year after which your record is cleared of all debt obligations.

You can petition for your own bankruptcy at your local county court. The cost for a personal bankruptcy petition is £510, which comprises £150 court fees and £360 official receivers fees. If you receive means tested benefits, you may be exempt or able to pay a reduced fee. Normally people would only voluntarily declare themselves bankrupt if they had few or no assets to protect. There are certain assets that are excluded from bankruptcy, such as personal possessions, household furniture, clothing, tools of the trade and certain pension entitlements.

Once completed, you are absolved of all your debts. Creditors can no longer hassle you or take legal action, and the court will only make you pay as much as you can afford after taking living expenses into account. Bankruptcy gives you the chance to start from scratch, and to begind rebuilding your credit record. However, you may find it difficult to obtain further credit after being made bankrupt. There is also a chance the court will decline your petition for bankruptcy and decide you can coontinue to pay your debt with court assistance.