What is an undischarged bankrupt and what restrictions apply to them?

Facing bankruptcy is one of the most stressful situations a person can experience. If you’ve recently been made bankrupt, or you’re trying to understand what lies ahead, it’s natural to feel uncertain about what the process means for your day-to-day life. Knowing exactly where you stand and what you can and can’t do during this period can make a real difference in how you move forward.

At Isadore Goldman, we specialise in insolvency exclusively. Our solicitors provide clear and pragmatic advice to individuals at every stage of the bankruptcy process, helping you navigate what can feel like an overwhelming situation with confidence.

What is bankruptcy?

Bankruptcy is a formal legal process governed by the Insolvency Act 1986. It’s designed to help individuals who are unable to repay their debts. When a bankruptcy order is made, a Trustee in Bankruptcy is appointed to manage your assets and financial affairs on behalf of your creditors.

Bankruptcy applies to individuals in England and Wales. It’s not the only option available, and alternatives such as an Individual Voluntary Arrangement (IVA), a formal agreement between you and your creditors to repay debts over time, may be more appropriate depending on your circumstances. Seeking early legal advice is always the right first step.

How does the bankruptcy process work?

You can make yourself bankrupt by way of an online application through the Insolvency Service. Once you’ve submitted your application and paid the relevant fee, an adjudicator (an official who assesses bankruptcy applications on behalf of the Insolvency Service) will review the information you’ve provided. If the application meets the requirements, a bankruptcy order is issued.

Following the order, an Official Receiver (an officer of the court and a member of the Insolvency Service) is appointed, as a Trustee in Bankruptcy to oversee your case. In some cases, a licensed insolvency practitioner is appointed as Trustee in Bankruptcy (“Trustee”) instead. Your Trustee takes control of your assets and works to repay your creditors as far as possible. You can find further detail in the GOV.UK guide to bankruptcy and in our dedicated guide on how to declare yourself bankrupt.

What is an undischarged bankrupt?

An undischarged bankrupt is a person who has been made bankrupt but hasn’t yet been formally released from the legal status of bankruptcy. During this period, a range of restrictions apply to your financial and professional life.

Being “undischarged” doesn’t mean your situation is permanent. For most people, bankruptcy lasts for 12 months before automatic discharge is granted. However, until that discharge takes effect, you remain subject to the rules and limitations that come with your undischarged status.

What restrictions apply to undischarged bankrupts?

Undischarged bankrupts are subject to a number of legal restrictions. The GOV.UK guidance on restrictions for undischarged bankrupts sets out the full list, which applies to England and Wales. The main areas to be aware of are outlined below.

Travel

If you’re based in England, Scotland or Wales, you’re generally free to travel within the UK. However, travelling abroad is more complicated. Your passport may be requested by the Official Receiver, and you may need to obtain permission before leaving the country. This is covered in more detail below.

Employment

You’re automatically disqualified from acting as a company director while you’re an undischarged bankrupt. There are also restrictions on holding certain public offices and professional roles. Some regulated professions, such as law and finance, may require you to disclose your bankruptcy status to your employer or regulator.

Credit

You must not borrow more than £500 without first telling the lender that you’re an undischarged bankrupt. Failing to disclose this is a criminal offence. Your bankruptcy will also remain on your credit file for six years from the date of the bankruptcy order, which will significantly affect your ability to access credit during and after this period.

How long does a bankrupt remain undischarged?

In most cases, bankruptcy lasts for 12 months from the date of the bankruptcy order, after which you’re automatically discharged. However, if you fail to cooperate with your Trustee or Official Receiver, your discharge can be suspended until you meet your obligations.

In more serious cases, a Bankruptcy Restrictions Order (BRO) or Bankruptcy Restrictions Undertaking (BRU) can be imposed, extending your restrictions for between two and 15 years beyond the original bankruptcy period. A BRO or BRU is typically imposed where conduct such as fraud, hiding assets, or incurring debts without a reasonable expectation of repaying them has been identified.

Can an undischarged bankrupt open a bank account?

Yes. You’re entitled to open a basic bank account while you’re an undischarged bankrupt. Several high street banks offer basic accounts to bankrupts, which allow you to receive income and make everyday payments, though they don’t include overdraft facilities or credit features. If your existing bank closes your account following a bankruptcy order, contact other banks directly to ask about their basic account options.

Can an undischarged bankrupt be a company director?

No. It’s a criminal offence to act as a company director, or to take part in the management of a company, while you’re an undischarged bankrupt unless you have specific permission from the court. This restriction applies whether you’re a formally appointed director or someone acting in that capacity without the title. If you’re involved in running a business, seek immediate, expert advice before taking any further steps.

Can an undischarged bankrupt get a mortgage?

It’s extremely unlikely that you’ll be able to obtain a mortgage while you remain an undischarged bankrupt. Most mainstream lenders won’t consider applications from people with a bankruptcy on their credit record, and this typically continues for several years after discharge.

Once you’ve been discharged, rebuilding your credit profile over time is an important step. Our blog on how soon your credit score might improve after bankruptcy offers further guidance on what to expect.

What happens if I travel abroad as an undischarged bankrupt?

Travelling abroad as an undischarged bankrupt requires careful thought. The Official Receiver or your Trustee may ask you to hand over your passport, particularly in the early stages of the bankruptcy. If you need to travel for work or family reasons, speak to your Official Receiver or Trustee first and obtain their permission where required.

Travelling without doing so could be treated as a failure to cooperate with the bankruptcy process, which can delay your discharge.

Can an undischarged bankrupt be self-employed?

Yes, you can work as a self-employed person while you’re an undischarged bankrupt. However, you must trade under your own name rather than a business name that differs from the name used in your bankruptcy order. You must also tell anyone who extends credit to you of more than £500 that you’re an undischarged bankrupt.

Failing to disclose this is a criminal offence. Any income you earn through self-employment may also be assessed by your Trustee, who can apply for an Income Payments Order (IPO) if your earnings are considered to exceed your reasonable domestic needs.

Speak to our solicitors for advice on undischarged bankruptcy

If you’re an undischarged bankrupt, or you’re concerned about a forthcoming bankruptcy order, it’s important to get honest and realistic advice as early as possible. Our insolvency solicitors at Isadore Goldman work exclusively in insolvency, and we’re here to help you understand your position and protect your interests wherever possible.

We have offices in London, Norwich and Portsmouth. To arrange an appointment with one of our solicitors, please email us at info@isadoregoldman.com.