James earned around £20million during a playing career that took in spells at Liverpool and Manchester City but, according toThe Sun, built up debts after divorce from his wife Tanya in 2005.
He represented England 53 times and also played for Aston Villa, West Ham and Portsmouth. He won the League Cup with Liverpool in 1995 and the FA Cup with Pompey in 2008.
James filed a debtor's petition at Hertford County Court last Friday, making his bankruptcy ruling official.
Documents state that the 43-year-old, who has been working as a pundit for BT Sport this season and has also modelled for Armani, will be automatically discharged from bankruptcy in a year.
His split from Tanya is believed to have cost him £3m plus a share of future earnings. The pair owned seven properties together, with James' assets believed to be worth around £6m in 2005.
James split from his wife after getting together with former school friend Amanda Salmon, who he made contact with via the Friends Reunited website.
The ex-Liverpool stopper could appear on BT Sport's coverage of the FA Cup final between Arsenal and Hull on Saturday.
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