What is the difference between bankruptcy and liquidation?


Bankruptcy and liquidation both refer to a legal process that occurs when debts cannot be repaid. Bankruptcy is the legal process through which private individuals can be released from their debt. Liquidation forms part of the insolvency process by which companies can achieve the same relief.

Both individuals and companies are advised to obtain legal advice from a specialist insolvency lawyer before they petition for bankruptcy as there may be more suitable alternatives for dealing with their debt.

For background information on this area of law, visit our debt and insolvency pages.


An individual can petition the court for bankruptcy, or one of their creditors can petition for their bankruptcy. In order for a creditor to apply for a debtor’s bankruptcy, the debtor must owe them at least £750.

The petition must be filed at a county court or the High Court in London. The court will then consider the application and grant the bankruptcy order if appropriate.

After the court has granted the order, an Official Receiver will be appointed to administer the bankruptcy. They are responsible for protecting the individual’s assets and for conducting an investigation into their financial affairs.

An Official Receiver can act as the trustee in bankruptcy or the role could be performed by an Insolvency Practitioner. The trustee in bankruptcy is responsible for selling the individual’s assets, including their home, and repaying the creditors.


A company that cannot pay its debts has additional options. It can enter into administration or receivership in order to try and keep it running. If these processes fail however, the company will be liquidated.

It is also possible for a company to enter liquidation voluntarily if it is decided to cease trading.

Liquidation refers to the process by which the companies’ assets are audited and sold off, usually to pay its debts. Depending on the size of the company, this can take anything from weeks to years. For example, the process of winding up the defunct Lehman Brothers bank has been going since its insolvency in 2008 and is not expected to finish until 2018.

Both individuals and companies are advised to obtain legal advice from a specialist insolvency solicitor before entering into bankruptcy or liquidation. In addition, legal advice should be obtained immediately if faced with involuntary proceedings.

If you are looking for a specialist bankruptcy solicitor, we can help. Call us on 0800 1777 162 or fill in the web-form and speak to one of our trained advisors. We can put you in touch with the right solicitor in your location and get you the advice you need.

0800 1777 162
or fill in the form
Our trained advisor contacts you
Your chosen specialist solicitor calls you
Quick enquiry form
Area of law:
What our clients say about us
"This was the first time I've been to court, which was a nerve-racking experience for me. However, I felt very prepared, I understood my case and representation - this was down to you."
Gavin, criminal motoring, Oct 15
"Your service, and the prompt call back from your recommended firm was very good. I would not hesitate to call again or recommend your service."
Ian, employment law, Truro, July 15
"The firm were excellent, could not have been better! They are exactly what I need right now."
Linda, criminal defence, Thames Ditton, Jul 15
"Your contact and service was immediate and utmost professional, 10/10."
TF, conveyancing, Dudley, Jun 15
"I appreciate the service that you provide. I found you to be courteous, efficient and reassuring at a time when my confidence in justice is completely negative."
Patrick, litigation, Pontypridd, Jun 15
"I cannot tell you how much I appreciate the speed of which you came back to me in. If anyone else can benefit from your help like I have done, it would make my day."
Gail M, family law, Potters Bar, Jun 15
"Your assistance was extremely helpful. Particularly to someone who in 40 years of business has never experienced this sort of issue."
TD, commercial litigation, Galashiels, Apr 15
"It is difficult to express the value Contact Law has to someone like me who had very little understanding of the law and how to proceed forward with my case. Thank you for the service you provided."
AE, defamation law, Worthing, Apr 15
"Thank you for the efficient service I received. I was contacted by your solicitor on the same day as my request. Your quick response to my situation made me feel secure."
AN, employment law, London, Apr 15
"Your service was excellent, very fast and informative. I never got the impression of being pressurised at all. The solicitor you recommended was also excellent – very knowledgeable and supportive."
JHD, Motoring law, Liverpool, Apr 15
Contact Law supports the endeavours of STAE and commends all the work they are undertaking to assist in the plight of the Asian Elephant


We use cookies on the Contact Law site to help us improve it.

If you would like to allow our cookies, please click 'Continue' or carry on browsing. For more information on cookies and how to change your settings, click 'More info'.