You have to pay a fee to apply for bankruptcy. However there are some options which could in effect allow you to go bankrupt for free.

Included in this article:

• Can you go bankrupt for free?
• Could you borrow the money you need?
• Sell your car to pay for Bankruptcy
• Should you wait for creditors to make you Bankrupt?

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Can you go Bankrupt for Free?

It is not possible to go bankrupt for free. When you apply you have to pay an application fee regardless of your circumstances.

That said, one way to avoid paying the fee yourself is to stop paying your unsecured creditors. Instead save this money towards the fee.

When you stop paying your creditors are likely to start collections actions against you.

If you get any calls from creditors, be honest with them. Explain that you are going bankrupt. They will normally agree to put your account on hold.

There is no reduction in the bankruptcy application fee if you are on benefits. You will still have to pay the full amount.

Could you Borrow the Money you need to go Bankrupt?

You are allowed to borrow money to pay for your bankruptcy application. You might be able get help from family or friends. Alternatively you could consider using an overdraft or other credit facility.

Any new debt you incur in this way is included in your Bankruptcy. As such in effect you go Bankrupt for free. Of course it is not ideal to borrow more in this way. However you will not be penalised for doing so.

If the Official Receiver asks where you got the money to pay for your application be honest. They will understand that you borrowed a little more to prevent your overall debt situation becoming worse.

If you borrow money from family or friends you are allowed to pay this back. However you will normally have to wait until after you are discharged.

Sell your Car to Pay for Bankruptcy

Once you are bankrupt you can only keep your car if it is worth £1000 or less. If its value is greater than this you will usually have to sell it, buy a cheaper one and give the difference to the Official Receiver.

Because of this if your car is worth more you should consider selling it before you go bankrupt. Then buy a different one for no more than £1000. Any spare money can be used to pay your bankruptcy fee.

It is acceptable to use some of the additional cash you raise from the sale to put your new car through a service and MOT. In addition it can be used for reasonable living expenses. However any surplus after this will normally have to be handed to the OR.

The idea of selling your car to pay for bankruptcy might seem crazy. However if it is worth more than £1000 it could be a smart move.

Should you wait for your creditors to make you Bankrupt?

You might think that one way to go bankrupt for free is to do nothing. Instead you could simply wait for one of your creditors to make a petition.

If they did this they will have to pay the associated fees not you. However it is very unlikely that this will happen.

Most of the people you owe money to will never take this action. It would mean they lose control of the collection process and are never likely to get their money back. They are therefore far more likely to use other debt collection methods.

The only creditors who might make you bankrupt are HMRC, trade creditors or an individual you owe money to who just wants to make your life difficult.