The Effects of Bankruptcy
The sections below describe some of the effects of bankruptcy. If you have any further questions about the effects of bankruptcy then please feel free to ask (ask piggy).
Bankruptcy and your Business
One effect of bankruptcy is that if you are self employed your business is normally closed down and any employees are dismissed. If you wish to avoid this, an IVA may be a more suitable solution.
Throughout bankruptcy you remain responsible for completing all tax and VAT returns. You will also have to give all your business accounting records to the official receiver when asked to do so.
If you wish to be self employed when bankrupt there is nothing to stop you from doing so, however, you will remain subject to bankruptcy restrictions (See bankruptcy restrictions below). You may wish to seek bankruptcy advice to see how these restrictions will affect you.
Another effect of bankruptcy is that work-related registrations, licenses and permissions may be affected. The body that issued the registration should be able to inform you of the treatment following bankruptcy. Any value associated may belong to the trustee.
Bankruptcy Restrictions
From the moment the order is made the effects of bankruptcy are immediate and bankruptcy restrictions will apply. It is important not to break these restrictions as to do so will be a criminal offence. As an undischarged bankrupt the restrictions mean you cannot:
- Get £500 or more of credit either alone or jointly with any other person without informing the lender of your bankruptcy
- Carry on business (directly or indirectly) in a different name from that in which you were made bankrupt, without telling all those with whom you do business the name in which you were made bankrupt
- Be concerned (directly or indirectly) in promoting, forming or managing a limited company, or acting as a company director, without the court's permission, whether formally appointed as a director or not
You may not hold certain public offices. You may not hold office as a trustee of a charity or a pension fund.
Bankruptcy Restrictions Undertaking and Bankruptcy Restrictions Order
A bankruptcy restriction undertaking has the same effect as a bankruptcy restriction order without the need to go to court. Both have the effect of extending the time that you are subject to bankruptcy restrictions for between two and fifteen years.
The Official Receiver will ask you to accept a bankruptcy restriction undertaking if he/she decides that you have been dishonest before or during your bankruptcy or that you are otherwise to blame for your position.
If you do not accept the bankruptcy restrictions undertaking then the Official Receiver may apply to the court for a bankruptcy restrictions order.
Income Payments Agreement and Income Payments Order
If you have surplus earnings after meeting the domestic living needs of you and your family your trustee may ask you to accept an income payments agreement where a percentage of your surplus will be paid to your creditors. Each case is assessed individually and the agreement will last for a maximum of three years from the date of the agreement.
An income payments order may be obtained from the court if you do not agree to an income payments agreement.
Both the agreement and the order can be changed if your income increases or decreases. It must be put in place before your discharge from bankruptcy.
Bankruptcy Bank Account
Upon filing for bankruptcy it is possible that your bank account will be closed. You may therefore want to make alternative arrangements for receiving your wages and paying bills.
Bankruptcy and Employment
Some professions prevent practice by bankrupts or discharged bankrupts.
