What Percentage of Bankruptcies Are Denied in the UK?

If you’ve become insolvent and are struggling to pay your bills, then it’s possible for you to declare bankruptcy. Declaring bankruptcy offers individuals in financial difficulty a fresh financial start, but as it’s a formal legal procedure, there are implications to consider first.

The bankruptcy process can be confusing, and individuals often ask who qualifies for bankruptcy, how much you have to owe to declare bankruptcy, and for what reasons, if any, their application might be denied.

To clear up the confusion, the team at Irwin Insolvency decided to look at what percentage of bankruptcies are denied in the UK, and for what reasons.

What Percentage Of Bankruptcies Are Denied in the United Kingdom?

Bankruptcy is a legal process that has to be approved or denied by a UK court of law. Bankruptcy applications are processed by the UK’s dedicated Insolvency Service, and the reality is that very few bankruptcies are denied.

It’s estimated that as little as one per cent of bankruptcy applications in the UK are denied by the Insolvency Service each year. This is because the financial requirements for declaring bankruptcy could be considered to be fairly relaxed, and because bankruptcy is only generally entered into as a last financial resort when individuals have exhausted other methods of avoiding insolvency.

Once the bankruptcy process has been approved, it’s important to understand that there’s no turning back. For this reason, it’s always recommended that you speak to a financial adviser before making the decision, particularly given the high approval and low denial rate.

Why Would Bankruptcy Be Denied?

What percentage of bankruptcies are denied in the UK? Just one per cent. This means that there are very few reasons why the Insolvency Service would deny your bankruptcy application. To declare bankruptcy, individuals simply need to be insolvent. This means they can no longer pay their debts because they have more money going out than coming in. They also have to be able to pay the £680 bankruptcy application fee.

Meeting this basic requirement of being insolvent is ordinarily enough to have an application approved, hence the low denial rate. There are however a few technical reasons why your application might be denied by the Insolvency Service:

  1. You are not a resident of the UK or the geographic area, such as England and Wales, Scotland, or Northern Ireland, where you are applying for bankruptcy.
  2. You are not actually insolvent (for example, you could have a pension fund worth more than your debt that you didn’t know you had access to).
  3. The application form was filed incorrectly or information was missing.

What Happens If My Application Is Denied?

An adjudicator appointed by the Insolvency Office will assess your bankruptcy application. They will check to ensure that you are insolvent and that you qualify to apply for bankruptcy in the UK.

This review process can take up to 28 days, and if the adjudicator finds fault with your application and has reason to deny it, then you’ll be sent an official Notice of Refusal by the Insolvency Service. It should explain why your application was refused and you’ll then have the opportunity to ask for the decision to be reviewed.

The review process is only likely to result in a change in the decision if you present new evidence or show the evaluation wasn’t carried out correctly. Before entering into a review, it’s important to ask an insolvency expert for assistance, as they may be able to highlight where the application needs changing.

If your bankruptcy application is denied, then you are entitled to a partial refund. You’ll be returned £550 of the total £680 application fee. It’s then possible to lodge another application for bankruptcy at a later date, if your circumstances change in the future.

How Much Money Do I Need to Owe to Declare Bankruptcy?

Individuals in financial distress often wonder how much money they need to owe in order to declare bankruptcy. It’s common for people in debt to believe that they don’t owe enough money for their bankruptcy application to be approved.

The reality is that there’s no minimum threshold for bankruptcy. Anyone who is insolvent can declare bankruptcy, and there’s no distinction between owing £1 and owing £100,000. This is another reason why bankruptcy denial rates are so low, but for individuals who owe very little, there is almost always a better alternative to bankruptcy.

Individuals who owe £5,000 or more to creditors may find that their creditors file for bankruptcy on their behalf (and without their approval), often as a last resort when attempting to claim back the money owed to them.

What Are the Alternatives to Bankruptcy?

An adjudicator assesses bankruptcy applications, however they do not offer financial advice. If you are insolvent and meet the other criteria for bankruptcy, such as being resident in England and Wales, then you will be declared bankrupt even if there could be a better option available for you.

For this reason, it’s important to always seek out impartial advice before declaring bankruptcy. There could be alternative financial options available to you that helps you to avoid bankruptcy and turn your finances around. Bankruptcy can result in the loss of your assets, including your car and home, and it remains on your financial record for many more years to come, so it’s essential that you make the right decision.

The most common alternatives to bankruptcy include:

  1. Administration order
  2. Debt consolidation plans
  3. IVA (individual voluntary agreement)

Contact Irwin Insolvency to Find Out If Declaring Bankruptcy Is Right for You

Declaring bankruptcy could be the fresh financial start you need, but it’s not the only option available. The Insolvency Service denies very few bankruptcies, so it’s important to ensure that this is the right decision before lodging an application. Always seek out impartial and expert financial advice before declaring yourself bankrupt. With decades of experience, the team at Irwin Insolvency can help. Contact Irwin Insolvency today for your free consultation.

Contact Irwin Insolvency today for your free consultation

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About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency, rescue and turnaround.