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Job and work - impact of bankruptcy

Going bankrupt could have a serious impact on your job and working life. There are certain restrictions you have to follow if you're involved in running a business and some professions bar bankrupt people from working in them. This means it's vital you understand the impact that going bankrupt could have on your work.

This page explains when going bankrupt might have an impact on your job and work.

Top tip

Going bankrupt doesn't prevent you from making a claim for unfair dismissal, if you have reason to do so and you qualify to make a claim. A dismissal is unfair if the employer dismisses you unreasonably or without following a reasonable procedure.

If you're bankrupt and you think you've been unfairly dismissed from your job for any reason, including the fact you're bankrupt, you should get independent advice.

Your local Citizens Advice Bureau can give you advice about employment problems. To search for details of your nearest CAB, including those that can give advice by e-mail, click on nearest CAB.

Do you have to tell your employer about your bankruptcy?

Generally, you don't have to tell your employer if you go bankrupt. However, you should check the terms of your contract of employment carefully to see if it says anything about you having to tell your employer if you go bankrupt. This is particularly likely to apply to you if you work in a financial organisation or role.

Will you lose your job if you go bankrupt?

In most cases, going bankrupt should have no effect on your employment. However, this isn't always the case and there may be issues if one of the following applies to you:

  • you're employed in a role that involves financial matters, such as working in a bank, and your employer is unwilling to carry on employing you because of your bankruptcy
  • you're employed in certain regulated professions that require you to be licensed or registered and going bankrupt would disqualify you as a member of your professional body. This applies to some professions like law, accountancy, financial services and banking - if you're unsure whether this would apply to you, you should check directly with your professional body
  • you're an insolvency practitioner - you would be banned from working in the role when declared bankrupt
  • you're licensed to carry out a specified role in the gambling industry, such as a dealer or croupier - your licence will automatically lapse when you become bankrupt, although you may be able to reapply to the Gambling Commission.

Even if you don't lose your job, you may find that bankruptcy causes other problems for your employment, including:

  • you may find it more difficult to get a job in certain industries in the future, such as the civil service, the police or a security firm
  • your employer may place restrictions on the kind of work you can do, even if you keep your job.

It's important to find out if your job is affected before you go bankrupt.

Can you carry on running a business?

If you own a business and are made bankrupt, the bankruptcy trustee will take over the rights to your business. This will normally mean:

  • the business will be closed down
  • the employees will be dismissed
  • the assets of your business will be sold.

If you're self-employed as a sole trader, you can start trading again. It's worth remembering that you'll find it very difficult to get credit, which may make it difficult for you to carry on trading.

Going bankrupt will also place certain restrictions on the involvement you can have in running a business. If you break any of these restrictions you'll be committing a criminal offence. They include:

  • you can't be a company director without permission from the court
  • you can't be involved in setting up, promoting or managing a limited company without permission from the court
  • you can be self-employed or trade in a partnership, but if you run a business under a name that's different to the one in which you were made bankrupt, you must tell everyone you do business with the name under which you were made bankrupt.

More about bankruptcy offences

Next steps

More information

'Dealing with debt - how to wind up a partnership' from the Insolvency Service at www.bis.gov.uk

Business Debtline (BDL) is a charity which offers free, impartial and confidential advice to businesses in financial difficulty in the UK both on its website and by a helpline.

Business Debtline
Freephone: 0800 197 6026 (Monday to Friday from 9am to 5pm)
Website: www.bdl.org.uk

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