In most cases bankruptcy should not affect your employment, however there are circumstances where your employment may be affected. This article explains how bankruptcy can affect your employment.
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:
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:
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.
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 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.
When you are declared bankrupt you do not automatically lose your bank account but your bank may ask you to switch to a new basic account which would have no overdraft or credit facilities. 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.
If you work overseas, bankruptcy has no bearing at all because it only applies to your finances in the UK; you are not obliged by British law to make your bankruptcy known to foreign employers though local legislation may be in place overseas which does require you to disclose it. This is uncommon and unlikely to be encountered in practice. For more information, please read our article on declaring bankrupt and moving overseas.
Firstly, it’s important to note that you would not have to cease being self-employed in bankruptcy if you did not wish to. If you do stop your self-employment then, you would need to complete your self-assessment form for the previous tax year. We would suggest contacting HMRC to find out whether they would be prepared to bill you before the end of the tax year in view of the fact you have stopped your self-employment. Any tax that you have not yet been billed for would not be included in your bankruptcy. You may wish to wait until you have the bill before proceeding with your bankruptcy, but this could be some time.
Once you have been fully discharged from your bankruptcy we cannot foresee any reason as to why you cannot set-up your own business. Please take a look at our article on how bankruptcy affects business owners for more details.
Your employer need not know that you have declared bankruptcy and there are no restrictions on being employed in the vast majority of jobs if you are bankrupt.
I would always let your company know what is happening because it is polite and professional to do so and because bankruptcy is a matter of public record so you can’t guarantee they won’t find out. Bankruptcy is advertised in your local paper, the London Gazette and on the internet.
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.
The Insolvency Technical Manual states the following: Where a bankrupt has employees the official receiver 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 official receiver 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 as they cannot be a director of a limited company for 12 months. They may have further restrictions put on them that means their bankruptcy is extended past the standard 12 months, in this case, there are further restrictions on how they trade and they cannot be a director of a limited company for the length of the extra restrictions.
The Official Receiver will need to be informed of a change of employment or wage and you will need to go through your new income and expenditure to see if an Income payment Agreement is now a possibility. This is set for a period of 3 years and if you have £20 or more left each month after all daily living costs have been taken care of, then you will be asked to pay into your bankruptcy. So it could be possible to pay back some or all of the debt.
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