If you are receiving benefits there is no reason why you cannot go Bankrupt to deal with a debt problem.

Included in this article:

• Can you go bankrupt while on benefits?
• Will you have to make payments towards your debt?
• How much does it cost?
• Can you borrow to pay for bankruptcy?

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Can you go bankrupt while on benefits?

You can go Bankrupt if you are on Benefits. The amounts you are receiving are not affected in any way. They will continue to be paid to you each week or month in the same way as the are now.

Given you are on a low income it might be an ideal solution for you. Once you are bankrupt you will not have to make any further payments towards your debts unless you can afford to do so.

If you are renting your property will not be at risk as long as as the rent payments are maintained. Your landlord is unlikely to be informed about your situation. If you live in council property and have rent arrears these debts will also be written off.

Struggling to get your head round all of this? We can help. Call us (0800 077 6180) or complete the form below. The advice is free and confidential.

Will you have to make payments towards your debt after you are Bankrupt?

You are required to declare all your benefits income on your application form. However this does not mean that money will be taken from you. It is likely that you will actually be better off as your ongoing debt payments will stop.

One of the advantages of bankruptcy is that you only have to make further payments towards your debts if you have disposable income. It is unlikely that this will be the case if you receive benefits.

If you are receiving Disabled Living Allowance (DLA) or Personal Independence Payment (PIP) you must include this in the income section of your application. However how you spend the money does not have to be justified. You simply include the same amount in your expenses budget.

Where you do have disposable income you must expect to pay this towards your debt for 3 years. This could happen if you have other forms of income as well as benefits.

How much does bankruptcy cost if you are on benefits?

Before you go bankrupt you have to pay a fee to the Government. There is no way around this and no possibility of a discount.

Generally speaking there are two ways of getting the fee together. You can either borrow the money you need or save it. To help you save you should stop paying your unsecured creditors. The money you would have paid them can then be put towards the fee.

Your creditors are likely to contact you if you you stop paying them. You should tell them that you have decided to go bankrupt and ask them to put your account on hold to give you time to organise your application. They will normally be helpful in this regard.

If your debt is less than £30,000 you might be eligible for a Debt Relief Order. This will give you the same outcome as going bankrupt but the application fee is much cheaper.

Can you borrow to pay for bankruptcy?

You are allowed to borrow money to pay for bankruptcy. If you have available credit you can use this facility to pay the fee. You could also consider borrowing from friends, family or a Payday loan company.

Any money borrowed for this reason is then included as a debt and written off as part of the process. As such remember you will not be able to repay a friend who has lent you the money until after your bankruptcy is over.

You may be worried that it is fraudulent to borrow more just before going Bankrupt. However as long as the money is used for paying the fee it is not a problem. The Official Receiver understands you borrowed just a little more to stop your overall debt situation getting worse.

Thinking about going bankrupt but need more advice? Call us (0800 077 6180) or complete the form below. Its free and confidential.