What Debts Are Excluded From Bankruptcy in England?

A bankruptcy order can stop the calls, letters and constant mental arithmetic that come with unmanageable debt. But if you are asking what debts are excluded from bankruptcy, the honest answer is that not every obligation disappears at the end of the process. Knowing the difference before you apply can prevent a nasty surprise later.

For most people, bankruptcy writes off a wide range of debts they cannot realistically repay. Credit cards, loans, overdrafts, catalogue accounts, utility arrears, rent arrears and tax debts are commonly included. Yet some debts survive your discharge, while others are tied to an asset such as your home or car. The wording can be confusing, but the practical question is simple: what will you still need to deal with afterwards?

What debts are excluded from bankruptcy?

In England and Wales, certain liabilities are not normally written off when you are discharged from bankruptcy, usually after 12 months. They may still be listed on your application and considered by the Official Receiver, but bankruptcy does not release you from the responsibility to pay them.

The main categories are student loans, court fines, child maintenance and some debts caused by fraud or a breach of trust. Criminal confiscation orders are also not written off. Each has its own rules, so it is worth looking at the actual source of the debt rather than relying on what a creditor has called it in a letter.

This does not mean bankruptcy has failed if you have one of these debts. It means you need a realistic plan for it alongside the bankruptcy. For someone with £35,000 of credit cards and loans plus a smaller court fine, clearing the unsecured borrowing through bankruptcy can still take enormous pressure away. But the fine remains payable.

Student loans

Student loans are generally excluded from discharge in bankruptcy. That includes government-backed student loan borrowing, whether repayments are collected through PAYE or directly through the Student Loans Company.

The key point is that bankruptcy does not turn off the usual repayment rules. If your income is below the repayment threshold, you may not be required to pay at that time. If your income later rises, deductions can restart in the normal way. Do not assume a student loan is included simply because it appears alongside your other debts on a credit report.

Court fines and criminal penalties

Magistrates’ court fines and other criminal financial penalties are not written off. This can include fines for motoring offences and certain other penalties imposed through the criminal courts.

If you are struggling to pay, speak to the court enforcement team rather than ignoring the balance. Bankruptcy may remove many other debts, leaving you in a much stronger position to agree affordable payments, but it will not cancel the fine itself.

Child maintenance and family-related payments

Child maintenance arrears are not normally written off by bankruptcy. Nor are some obligations arising from family court proceedings, including certain maintenance payments. This is an area where the paperwork matters. A payment described informally as support for a former partner may have a different legal status from a formal maintenance order.

The sensible approach is to obtain the latest statement and establish exactly who is owed, what period it covers and whether there is a court order or Child Maintenance Service assessment behind it. Guessing can lead to the wrong expectation.

Fraud and breach of trust debts

A debt arising from fraud, fraudulent breach of trust or certain similar wrongdoing may survive bankruptcy. This can include an overpayment where fraud has been formally established, rather than a straightforward mistake or change in circumstances.

There is a significant difference between a benefit overpayment caused by an administrative error and one linked to a finding of fraud. The first may be capable of being included; the second may not be written off. If this applies to you, do not hide it because you feel embarrassed. Full disclosure gives you the best chance of getting clear advice before you submit an application.

Secured debts are different, not always excluded

A secured debt is usually not written off in the way an ordinary credit card balance is, because the lender has security over an asset. The most familiar examples are a mortgage or hire purchase agreement on a car.

Bankruptcy does not automatically allow you to keep a house or vehicle while stopping the payments. If you want to retain the asset, you generally need to maintain the contractual payments and satisfy the lender’s requirements. With a car on finance, that may mean continuing the agreement if it is affordable and the lender agrees. With a mortgage, arrears and the lender’s security need very careful consideration.

There is an important distinction here. If a property is repossessed or surrendered and there is a mortgage shortfall, that shortfall can often be included in bankruptcy if the liability arose before the bankruptcy order. The lender’s security remains, but the unsecured shortfall may be dealt with differently. This is why it is unwise to assume either that all mortgage debt survives or that bankruptcy protects the property.

The same principle can apply to a vehicle. If you hand back a financed car, any outstanding liability needs to be assessed against the agreement and the date of the bankruptcy order. The right answer depends on the facts, not on a general rule found online.

Debts that are usually included

People often worry that a debt is excluded when it is not. Bankruptcy commonly deals with unsecured borrowing such as credit cards, personal loans, overdrafts, payday loans, store cards and catalogue accounts. It can also include arrears for gas, electricity, water, mobile phones, broadband, rent and council tax.

HMRC debts are another major concern, particularly for sole traders or people whose tax position has got out of hand after a difficult period. Income tax, VAT and National Insurance liabilities may be included, provided they relate to the relevant period before bankruptcy. The details can become more complicated where there are ongoing business issues, assessments, penalties or a self-employed person has continued trading.

Council tax can cause particular anxiety because demands often arrive quickly and enforcement action feels very personal. In many cases, council tax arrears for a period before bankruptcy are included. However, council tax liability is based on a yearly charge, and the dates matter. A proper review of the bill is better than relying on the instalment date shown on a reminder.

What happens to joint debts and guarantors?

Bankruptcy only releases the person who becomes bankrupt. If you have a joint loan, overdraft or tenancy debt with somebody else, the lender can still pursue the other borrower for the full balance. The same is true where someone has guaranteed your borrowing.

That can be emotionally difficult, especially where the other person is a partner, parent or close friend. But it is better to be upfront before applying. Your bankruptcy may remove your personal liability, yet it does not remove theirs. In some situations, that changes the timing of an application or makes a conversation with the joint borrower essential.

New debts do not disappear

Bankruptcy deals with debts that existed when the bankruptcy order was made. New bills and borrowing afterwards are your responsibility. Rent, utilities, council tax, mobile contracts and credit taken out after the order must be paid as they fall due.

This is one reason a realistic household budget matters before applying. Bankruptcy gives you a route out of old debt, not a blank cheque for future spending. If your income is more than you reasonably need for household living costs, you may also be asked to make payments under an Income Payments Agreement or Order for up to three years. That is separate from which old debts are written off.

Check the debt, not just the creditor

The same creditor can hold debts with different treatment. For example, a local authority might be owed ordinary council tax arrears, a housing-related overpayment and a court fine. Calling all three a council debt would not tell you whether bankruptcy writes them off.

Gather recent statements, enforcement notices, court paperwork and any letters showing how the balance arose. Do not leave out a debt because it feels awkward, is in dispute or has been passed to a debt collector. The Official Receiver needs a complete picture, and you need clarity on any balance that may remain after discharge.

If you are close to applying, getting this checked before you pay the bankruptcy fee can save a great deal of worry. The Bankruptcy Helpline can help you work through the paperwork, identify the debts that need particular attention and prepare an application that reflects your real circumstances.

You do not need to know every legal term before asking for help. You simply need to be honest about what you owe, how it arose and what is keeping you awake at night. Once the debts that will remain are out in the open, the rest of the decision can feel far less frightening.