Which debts are not dischargeable in bankruptcy?

Bankruptcy can offer something of a 'fresh start' to borrowers who are in very serious problems with their debts.

However, as it's a last resort for people who simply cannot afford to repay what they owe in any kind of realistic timeframe, bankruptcy is by no means an 'easy' approach.

There are certain types of debts, for instance, that cannot be included in a bankruptcy case - which means they won't be written off once you're discharged.

Let's take a look at how bankruptcy works and what debts you won't be able to 'walk away from' once your bankruptcy has successfully finished.

You can get advice on bankruptcy here.

What debts can't be discharged in bankruptcy?

One of the main advantages of bankruptcy is that once you've been successfully discharged - typically, after 12 months - you'll have any included debt that you can't afford to repay written off, which could go a long way to help you get back on your feet financially.

However, not all types of debts can be included in bankruptcy. Going bankrupt is only designed to help people with unsecured debts they're struggling with. These include things such as credit/store cards, catalogue debts, personal loans and overdrafts.

You can't include any secured debts, such as your mortgage or a secured loan, in a bankruptcy, and other debts such as court fines, Child Support payments and student loans can't be included either. This means that you'll have to keep on making your payments to these debts while you're going through bankruptcy, and once you're successfully discharged, you'll still have to keep on top of these debts - failing to make your payments could lead to court action, repossession and other serious consequences.

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How does bankruptcy work?

Bankruptcy must be agreed through the County Court before it can go ahead.

Once you enter bankruptcy you will:

• Repay what you can afford each month - if anything - for a period of up to three years, without using money you need for your essential costs (e.g. rent/mortgage, Council Tax and food)
• Stop your lenders taking any further action against you
• Have any included debts written off once you've been successfully discharged: usually after a year.

To repay what you can towards your debts, some of your assets - and, if you're a homeowner, your home - may need to be sold during the bankruptcy process. This means that your personal 'estate' must be handed over to the Official Receiver overseeing your bankruptcy.

One of the biggest effects of bankruptcy will be on your credit rating, which will be negatively affected for six years. During this time, it's very likely you'll have problems getting further credit.

However, bankruptcy could be the best course of action if you're really struggling to find a way out of debt problems. Our debt solution finder can suggest how best to deal with your debts.

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Related resources

• IVA / bankrupt bank accounts
• Bankruptcy v IVA - Which is better?
• LILA - the Low Income Low Asset route to bankruptcy
• Is bankruptcy still an appropriate solution for serious debt problems?
• Can an IVA save me from bankruptcy?
• What is the minimum amount of debt to file for bankruptcy in Scotland?
• Repossession: what should I do?
• Homeowner help section

Tags: debt, bankruptcy, unsecured debts, secured debt, repossession

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