How Bankruptcy Affects Your Credit and Property
When you are declared bankrupt in England and Wales, a trustee is appointed to deal with your assets, which can include your home. The trustee has up to three years from the date of bankruptcy to decide what to do with any interest you have in your property. If your home has equity, the trustee may seek to realise it to pay your creditors.
Bankruptcy is typically discharged after 12 months, meaning you are released from most of your debts. However, the bankruptcy order remains on your credit file for six years from the date it was made. It also stays on the Insolvency Register, though this entry is removed after three months following discharge.
During the bankruptcy period and while the entry remains on your credit file, your ability to obtain any form of credit — including a mortgage — is severely restricted.
Timelines for Remortgaging After Bankruptcy
The realistic timeline for remortgaging after bankruptcy depends on several factors:
- During bankruptcy (before discharge) — you cannot take on credit of more than £500 without disclosing your bankruptcy to the lender, and in practice no mortgage lender will consider you
- After discharge but within six years — specialist lenders may consider you, particularly once two to three years have passed since discharge, but options are very limited and rates are high
- After the bankruptcy drops off your credit file (six years) — your options expand considerably, especially if you have rebuilt your credit in the interim
Many specialist lenders have a minimum waiting period of at least three years from the date of discharge before they will consider an application. The more time that has passed, and the more you have done to rebuild your creditworthiness, the better your terms will be.
Rebuilding Credit After Bankruptcy
Rebuilding your credit after bankruptcy requires patience and discipline. Start by registering on the electoral roll and opening a basic bank account if you do not already have one. After discharge, consider a credit-builder credit card — these are designed for people with poor credit and typically have low limits and high interest rates, but using one responsibly and paying it off in full each month demonstrates that you can manage credit.
Make all payments on time, including utility bills and mobile phone contracts. Each month of positive payment history adds to the picture lenders will see when you eventually apply for a remortgage.
Avoid applying for too many credit products in a short period, as each application leaves a hard search on your file. Focus on one or two well-chosen credit-building products and use them consistently over time.
Rates and Lender Options After Bankruptcy
Even with specialist lenders, you should expect significantly higher rates than mainstream borrowers receive. In the first few years after discharge, rates may be 4% to 6% above the best available deals. As time passes and your credit improves, this premium will reduce.
A stepped approach to remortgaging often works well. You might initially secure a deal with a specialist lender at a higher rate, then remortgage again after two or three years onto a better product as your credit history strengthens. Each successful mortgage builds your track record and opens the door to more competitive options.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.