Bankruptcy FAQ's

Article Written By: Moe Nawaz & Kiran Mistry

Bankruptcy can be a traumatic and difficult experience. Not only will there be financial repercussions and possible court hearings but also emotional distress and ramifications for your work and family. When considering bankruptcy as an option it is worth taking these emotional and logistical considerations into account before making any decisions.

Will I lose my self respect? Every bankruptcy is a matter of public record and so details of all bankruptcies are published in local and national newspapers. It is therefore difficult to andquot;hideandquot; a bankruptcy from friends and family. In the past there has been something of a social stigma attached to bankruptcy but with it becoming increasingly common this is not as true today.

Will I lose my kids?

Bankruptcy will not result in the loss of your children. The consequences of bankruptcy are likely to affect your children's day to day life but they will not be taken from you. It may lead to you having to sell your property and move home. You will also lose all non-essential assets and so it is conceivable that high value items in the home will be possessed by the Trustee.

However, if you do have children living with you it may be possible to postpone the sale of the house for up to a year after you are declared bankrupt. This will allow you to make alternative living arrangements in order to minimise the disruption caused by having to move home.

It is important to remember that a bankruptcy is a personal matter and will therefore not appear on the credit file of your children.

Will I lose my job and will my boss know?

Unless it is a stipulation of your contract it is not an obligation for you to tell your employer of your bankruptcy. However, as bankruptcies are a matter of public record it is conceivable that they will find out. In addition, HM Revenue and Customs will usually apply a 'nil tax' code to you for the rest of the tax year in which you were declared bankrupt and so this is another way in which your employer may find out about your bankruptcy.

There are some professions in which bankrupts are excluded. These include the licensed trade, estate agents and some legal and financial professions. You may also be ineligible to hold some public offices.

Your employment contract should contain the information you need to decide on your course of action and if not you should take advice from you HR or personnel department.

Will I be discriminated against?

It is unlikely that you will experience any kind of personal discrimination simply due to the fact you are a bankrupt. However, it is true that you will find it more difficult to obtain credit in the future as the bankruptcy is held on your credit file for six years. Many companies won't offer banking, credit card, loan or mortgage facilities to bankrupts and those that do are likely to charge higher rates of interest for the borrowing.

Will I lose my freedom?

Bankruptcy by its nature does place a person under some restrictions. Whilst a bankrupt doesn't lose and personal freedom, they may well lose some financial freedom due to the terms of a bankruptcy order. For example, you will normally have to inform the Trustee of any changes in your circumstances during the period of bankruptcy.

When a bankruptcy order is made, your bank account will be frozen and all cheque books and bank cards handed to the Official Receiver. It will therefore be more difficult to manage your personal affairs until the bankruptcy order is lifted. For example, if you made any application for credit overandnbsp; 500 you must declare your status as an undischarged bankrupt.

About the Author

Kiran Mistry (Insolvency Practitioner) wmproserve.co.uk Moe Nawaz (Business Turnaround Consultant) ukadvice.com
Kiran Mistry and Moe Nawaz have a combined experience of over 30 years in the Insolvency and Turnaround business. They have helped and advised 10,000's of business owners in the UK.

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