In most cases, bankruptcy should not affect your employment. However, there are circumstances where your employment may be affected. This article answers the question: Will bankruptcy affect your employment?
You may also find this article on getting benefits while bankrupt useful.
Can I get a job if I am bankrupt?
Yes, of course once a person declares bankrupt he/she deserves to have a second chance and start their new accounts and manage it well. The only jobs you can’t do if you are bankrupt are:
- Director of a company
- An estate agent
- Join the police or military
- Member of Parliament
- A trustee of a charity
- Be on the board of governors at a school or place of education
- Apply for a London Taxi Black Cab licence
- Any job regulated by the ‘Financial Services Authority’ (FSA)
- Be involved in the management, formation or promotion of a limited company with court permission.
- Act as a licensee if bankrupt
- Practice as a chartered accountant.
Please note that this is not an exhaustive list and there may be other roles that could be affected.
You may be able to work for a commercial bank, but this could depend on the bank you want to work for. Each bank will have their own policy, some roles will be regulated activity and cannot be undertaken by a person who is bankrupt. If you already work for a bank then you may need to check your terms of employment and speak to your bank’s confidential help line to see if your employment is at risk.
Some common examples of jobs not affected by bankruptcy include:
- Area management
- Bus Driver
- Black cab driver in London (You are permitted to work as a sole trader)
You should also be aware that each individual employer sets the criteria for the position they are offering and has to comply with various pieces of legislation, as an example equal opportunities, when they advertise and employ someone. There will be many types of jobs advertised that are not available to someone who is bankrupt or has been discharged from bankruptcy, but there isn’t a list of employers that you could refer to other than the details in the Insolvency Act.
Please note some professional bodies, such as chartered accountants or solicitors, may have rules prohibiting membership and you cannot enlist in the armed forces as an undischarged Bankrupt.
If you’re worried about your finances and seeking an alternative to bankruptcy, government-approved debt help can allow you to write off unsecured debt and stop creditor pressure.
How does bankruptcy affect my current employment?
Employment or unemployment do not prevent bankruptcy, just your solvency/ability to pay your debts. There isn’t really anything in bankruptcy law that says that you are required to be unemployed or employed to go bankrupt. The only time your employment may be affected by bankruptcy are:
- If you work within the finance industry (disclosure is required).
- If you work in the legal profession (disclosure is required).
- You have professional memberships or licences
- You are a Director of a Limited company (read our article on bankruptcy for business owners).
If you are unsure of whether your employment will be affected by bankruptcy, please check your contract of employment or speak to your HR department before making a decision. You might want to investigate the alternatives to bankruptcy, such as IVA and Debt Management. These are less restrictive and may be another option for you.
If you are a doctor, a lorry driver, a teacher, a postman – being bankrupt need never be disclosed unless you choose to make it known. For those occupations where it is an issue, all that is required is for you to tell your employer or professional body you have declared bankruptcy and for all practical purposes, once you have been discharged from bankruptcy, every occupation is once again open to you.
If I go bankrupt what happens to my wages?
You may need to switch over to a new bank account with no overdraft or credit facilities when made bankrupt. Your current bank account may be frozen shortly after you are declared bankrupt for them to confirm that your income and expenditure is as listed on your bankruptcy forms. During this process, your wages will still be paid into your current bank account and it is advisable that you withdraw the funds you need to live on prior to going bankrupt. At this stage, your bank will advise whether they wish you to downgrade to a basic account or whether they would like you to close your account and bank elsewhere. Some high street banks are more willing to give bank accounts to bankrupt people than others. Shop around locally and you will find a bank that will open a basic bank account for you.
What happens if I work abroad?
If you work overseas, bankruptcy has no bearing at all because it only applies to your finances in the UK. Under British law, you do not need to disclose bankruptcy to foreign employers. However, there may be legislation abroad, where you must disclose your bankruptcy. For more information, please read our article on declaring bankrupt and moving overseas.
Can I be self-employed after bankruptcy
You do not have to cease being self-employed in bankruptcy. If you do stop your self-employment then, you would need to complete your self-assessment form for the previous tax year. You must contact the HMRC if your circumstances change. We suggest asking them if they can bill you before the end of the tax year. Tax will not be included bankruptcy if you have not been billed for it. You may wish to wait until you have the bill before proceeding with your bankruptcy, but this could be some time.
Will my employer find out if I file bankruptcy
Your employer does not need to know that you have declared bankruptcy. There are no employment restrictions in the vast majority of jobs.
I would always let your company know what is happening because it is polite and professional. Bankruptcy is a matter of public record so you can’t guarantee they won’t find out. The local paper, London Gazette and the internet, can all advertise your bankruptcy.
Please note, Whilst you are subject to the bankruptcy order HM Revenue and Customs (HMRC) will usually apply a ‘nil tax’ code for the rest of the tax year in which you declare bankruptcy. HMRC applies nil tax codes for various reasons, and the new tax code will not tell your employer that you are bankrupt.
Can I employ people when I am bankrupt?
The Insolvency Technical Manual states: Where a bankrupt has employees the Official Receiver (OR) must terminate employment with effect from the date of the order. Whether or not the business continues to trade.
A standard notice should be sent to every employee who may have a claim for wages, holiday pay, payment in lieu of notice etc. or in respect of redundancy, The OR will then issue employees with a standard letter and the booklet “Redundancy and Insolvency, A Guide for Employees”, which contains a claim form.
A discharged bankrupt can employ people. But they may find it difficult getting credit in order to run a business. They cannot be a director of a limited company for 12 months. And may have further restrictions put on them. How you trade will be affected by the bankruptcy restrictions.
Changes in employment
The OR will need to be informed of a change of employment or wages. You will need to go through your new income and expenditure to see if an Income payment Agreement is now a possibility. You will have to pay into your bankruptcy if you have £20 or more left after your daily living costs. So it could be possible to pay back some or all of the debt.