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Bankruptcy And Your Assets

Updated for 2026

When you are declared bankrupt, you must inform the Trustee of all your assets. It is their decision as to what you can keep and what will be used to pay your creditors.

The Trustee takes control of all assets that are not exempt from bankruptcy. They will arrange for their sale and use the proceeds to cover the fees, costs and expenses of the bankruptcy before distributing any remaining funds to your creditors.

As a general rule, the sale of any asset should be expected to raise at least £500 towards the bankruptcy estate for the Trustee to consider claiming it.

When the bankruptcy order is made, your bank and savings accounts are frozen and seized by the Trustee. If your accounts are in credit, those balances become assets in the bankruptcy. For more on how this works, see our guide on bankruptcy and bank accounts.

Items Excluded From Bankruptcy

The law recognises that you need to maintain a basic standard of living and continue earning a living. Certain items are therefore protected from being claimed by the Trustee.

Items that can be excluded from bankruptcy include:

  • Household items essential for basic domestic needs, such as clothes, furniture and a television
  • A modest vehicle, depending on your circumstances (see bankruptcy and your car)
  • A residential tenancy
  • Items needed for your trade or employment, such as tools and computing equipment
  • Money held in pension funds (see bankruptcy and your pension)
  • Money obtained from a student loan, provided a balance of the loan remains payable

For information about what happens to your home, see our guide on bankruptcy and your property.

Disposing of Your Assets Before Bankruptcy

If bankruptcy is looming and appears unavoidable, you may consider taking personal responsibility for selling assets that would otherwise be sold by the Trustee, such as your car. In many cases, the Trustee would put items up for sale at public auction with the aim of getting a reasonable price as quickly as possible. You may be able to raise more money by selling assets through other means, such as private sale.

If you can raise enough money to repay what is owed, or agree a settlement with your creditors, this could prevent the bankruptcy altogether. It is worth noting that applying for bankruptcy currently costs £680, so avoiding it where possible could save you that fee as well.

However, you must take care to avoid selling or giving away your belongings for less than their true value. This is known as making “transactions at an undervalue” and is not permitted. Doing so may result in a Bankruptcy Restriction Order, which can extend the restrictions placed on you well beyond the normal discharge period.

Unreasonable Assets

If the Trustee determines that an asset is worth more than its “reasonable replacement value”, it may be sold. You would receive an allowance to buy a cheaper alternative, and the remaining balance (less the cost of a replacement) becomes part of the bankruptcy estate.

For example, if you own an expensive car worth £8,000 but only need a modest vehicle worth £2,000 for work, the Trustee could sell the car and allow you to purchase the cheaper replacement.

Assets Obtained or Received During Bankruptcy

Any assets or money you receive from any source while you are bankrupt (that is, before your discharge) may be claimed as part of the bankruptcy estate by the Trustee. You are legally required to disclose these to the Official Receiver or Trustee.

It is an offence not to disclose information such as:

  • Anything bequeathed to you in a will, for example a property or inheritance
  • Something of little value at the time of the bankruptcy order that rises in value before your discharge
  • Claims made against another person through court proceedings
  • Lottery winnings, redundancy payments or any other windfall

Could You Avoid Bankruptcy?

Before going down the bankruptcy route, it is worth considering whether an alternative debt solution might be more appropriate for your situation. Options such as a Debt Relief Order (DRO), an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP) could allow you to deal with your debts without losing your assets.

A DRO, for instance, is available if your total debts are under £50,000 and has been free to apply for since April 2024. You can explore all the options on our alternatives to bankruptcy page.

This page provides general information only and should not be considered financial advice. If you are unsure about your situation, seek guidance from a qualified debt adviser.