Bankruptcy is one way of dealing with debts you cannot pay. The bankruptcy proceedings:

• Free you from overwhelming debts so you can make a fresh start, subject to some restrictions
• Make sure your assets are shared out fairly among your creditors.

Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships.

A court makes a bankruptcy order only after a bankruptcy petition has been presented. It is usually presented either:

• By yourself (debtor's petition)
• By one or more creditors who are owed at least £750 by you and that amount is unsecured (creditor's petition)

A bankruptcy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankruptcy proceedings have begun. If you dispute the creditor's claim, you should try and reach a settlement before the bankruptcy petition is due to be heard. Trying to do so after the bankruptcy order has been made is both difficult and expensive.

If you were made bankrupt on or after 1 April 2004 you will be automatically freed from bankruptcy (known as 'discharged') after a maximum of 12 months. This period may be shorter if the Official Receiver concludes his enquiries into your affairs and files a notice in court.

However, if you earn more than is required for basic living a portion of your income can be taken to pay your creditors for up to 3 years.

The following are criminal offences for an undischarged bankrupt:

• Obtaining credit of £500 or more either alone or jointly with any another person without disclosing your bankruptcy.
• Carrying on business (directly or indirectly) in a different name from that in which you were made bankrupt, without telling all those with whom you do business the name in which you were made bankrupt;
• Being concerned (directly or indirectly) in promoting, forming or managing a limited company, or acting as a company director, without the court's permission, whether formally appointed as a director or not.

You may not hold certain public offices. You may not hold office as a trustee of a charity or a pension fund.

After the bankruptcy order, you may open a new bank or building society account but you should tell them you are bankrupt; they may impose conditions and limitations.

You may have to pay 3 fees when you take your petition and statement of affairs to court:

• The court fee of £175. In some circumstances the court may waive this fee; for example, if you are on Income Support.
• The deposit of £525 towards the costs of administering your bankruptcy. This deposit is payable in all cases
• The fee to swear the statement of affairs. In a county court, no charge is made to swear this affidavit, but in the High Court or before a solicitor there is a £7 charge.

If you are a married couple and you are both applying for bankruptcy, you will each have to pay separate fees. If you were in business as a partnership, each partner will have to pay separate fees, unless all the partners apply for a joint bankruptcy petition under the Insolvent Partnerships Order 1994.