Consequences of bankruptcy

This page provides an overview of the bankruptcy consequences that you should be familiar with before going to court. If you need help considering bankruptcy or going bankrupt then please seek advice.

You can characterise the consequences of bankruptcy as follows.

Bankruptcy consequences - Legal

Many people associate bankruptcy with financial consequence only, often neglecting the legal consequences of bankruptcy. Bankruptcy is a legal process and the legal consequences of bankruptcy can be very serious indeed. Please feel free to read through the information below but if you are considering bankruptcy and would like to establish whether or not you would be affected by them then please seek professional help.

Legal consequences of bankruptcy include:

• Bankruptcy offences, which are punishable by imprisonment or fine or both
• Previous transactions being reversed or altered.
• Bankruptcy restrictions order, which prolong the restrictions of bankruptcy for between 2 and 15 years.

It is important to note that your student loan will survive bankruptcy.

Bankruptcy consequences impacting your finances

The bankruptcy consequences can affect your finances as follows:

• An income payments order is a consequence that means you will still have to contribute to your bankruptcy debts for a period of 3 years
• Bank accounts for bankrupts are difficult to obtain free of charge. Visit the bank accounts page for more information.
• At the date of your bankruptcy you will lose control of your assets.
• You risk losing assets of value, including your home. Go to the bankruptcy and home page for more information.
• The bankruptcy order will remain on your credit report for six years making future borrowing difficult and expensive. When you apply for a mortgage you will usually be asked if you have ever been made bankrupt.
• Some professions, licensing bodies, associations and legal acts prohibit individuals who have had a bankruptcy order made against them or currently have a bankruptcy restriction undertaking or bankruptcy restriction order in place
• You may not be able to hold certain public offices.

Bankruptcy consequences - Business

If you are a sole trader then usually your business will be closed and any employees dismissed. If you intend to start back up in business then you must give consideration to the bankruptcy restrictions, they are consequences that can make business difficult.

Whilst you are bankrupt or subject to bankruptcy restrictions by way of an order or undertaking then you cannot act as a company director without the leave of the court.

If you are in a partnership at the time of your bankruptcy then the partnership will automatically dissolve upon the making of your bankruptcy order unless a deeds of partnership provides otherwise.

Reputation could discourage former and potential associates.

Lack of ability to raise credit could give rise to business difficulties.

What other bankruptcy consequence exist?

The above details just some bankruptcy consequences. As you experience bankruptcy and try to recover from it you will realise that bankruptcy has more than financial and legal consequences. If you would like to know how bankruptcy will affect you personally then it is important that you speak to an adviser. You may also like to read about some of the effects of bankruptcy.