What is the minimum amount of debt to file for bankruptcy?

17 July2021
Bankruptcy woman

A lender can technically petition for your bankruptcy if you owe them 750 or more. If you are applying for your own bankruptcy, there are no set guidelines about how much debt you must have, but bear in mind that it costs up to 700 up front to apply for your own bankruptcy.

You should only apply for bankruptcy if you have debts that you really cannot afford, because bankruptcy can cost you your home and have a big effect on your future. When you go bankrupt, it's recorded on your credit history and stays there for six years. This can cause problems if you apply for all sorts of things, like a mortgage, a mobile phone contract, a bank account - and even some jobs.

Having said that, bankruptcy can offer a 'light at the end of the tunnel' if your debts are completely out of hand, because it usually takes one year to go through bankruptcy (although your payments could go on for three years) and anything you can't afford is written off when you're discharged.

If it looks like the best way forward, we can help you to apply for bankruptcy. Leave your details with us and we'll contact you to discuss your options - or you can call us on 0800 195 2911.

An alternative to bankruptcy

A Debt Relief Order, or DRO, is a low-cost alternative to bankruptcy for people with debt problems who don't have any valuable assets and are on a low income. It only costs 90 to apply.

A DRO is similar to bankruptcy except your debts are frozen for 12 months and you aren't expected to make any financial contributions on a DRO. Lenders cannot take any legal recovery action - and your debts are written off at the end of 12 months (unless your circumstances have improved and you can start repaying your debts).

You could qualify for a DRO if your unsecured debts are up to 15,000 and your assets are worth 300 or less (which doesn't include a car up to the value of 1,000). You would only qualify if your disposable income was also 50 or less per month - the money you have available after your essential living costs.

You cannot apply for a DRO if you're already involved in any other insolvency proceedings, or if you've already had a DRO in the last six years.

If you're a homeowner, you couldn't apply for a DRO, because your home is an asset that's bound to be worth more than 300.

Like bankruptcy, a DRO will have a significant effect on your credit rating for six years.

Speak to a debt adviser here.

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Tags: debt relief order, DRO, bankruptcy, debt

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