Bankruptcy and your Business
Bankruptcy has the potential to seriously affect your business.
Depending on whether you’re self-employed, in a partnership or directing or owning a limited company, Bankruptcy has the potential to seriously affect your business.
Self Employed
Your tools of trade are excluded from bankruptcy such as the tools used by plumbers and joiners. Other assets are not excluded such as stock, debtors (monies owed to you), and vehicles. If your business has value, this would also be sold if it would generate monies to be paid to your creditors.
You have to trade in your own name unless you tell the parties you are trading with that are bankrupt. This only applies whilst you are bankrupt which normally lasts 12 months.
Trading in Partnership
The effect on a partnership will depend on the terms of the partnership. If there is no agreement, Bankruptcy will mean the partnership has to cease trading and will automatically face dissolution. Your Trustee will take over your share of the partnership and the assets of the partnership will have to be established and realised.
If there is a partnership agreement, this could state that you are removed as a partner if you are made Bankrupt. The partnership will still need to liaise with your Trustee about how any share you have in the partnership is turned into cash for your creditors.
Director and Shareholder of a limited company or an LLP
Whilst you are Bankrupt, which is normally for 1 year (unless your discharge is suspended) you cannot be involved in the promotion, formation or management of a limited company or a limited liability partnership.
Getting someone else to front your company, whilst you are actually running it “behind the scenes” is an offence and it is very easy to check this out. People frequently whistle blow and notify your Trustee and apart from facing possible action as you are breaking the law, you could find that your Trustee applies for your discharge to be suspended indefinitely.
Your share in the limited company is an asset and your Trustee will investigate to see if your shares can be sold to provide a return to your creditors. It will be possible for a new shareholder to purchase your shares as long as the Trustee considers the value they are offering is fair.
The Business Debt Advisor specialises in helping self-employed individuals. A detailed review by our team will help you decide on the best way to protect your business and allow you to offer an appropriate deal to your creditors.
More about bankruptcy
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Client Story
Shirley and her husband were involved as partners in the purchase of a potential development with another couple. Unfortunately part way through the development the relationship between the 2 couples broke down and Shirley and her husband decided to exit the deal and hand over their share to the other party. This resulted in action taken against Shirley’s husband and he chose to petition for Bankruptcy. At the time no action was taken against Shirley. However, some years later the other party issued a writ against Shirley and entered into a Deed of compromise to repay of £57,000 the debt by monthly repayments. Shirley’s sought advice from The Business Debt Advisor team on Shirley’s behalf. Shirley’s health had been seriously effected by a bout of cancer and the stress of the debt was effecting her recovery. As Shirley and her husband lived in rented accommodation and had minimal assets, it was clear that bankruptcy was really the only sensible option. The Business Debt Advisor team helped Shirley pull together financial information on her assets which were minimal plus her debts and income and expenditure. We helped her complete her bankruptcy application online and her husband who was still working, helped out with the application fee of £680. Within days Shirley was bankrupt and her experience of dealing with the Official Receiver was very positive. They agreed with her that she would affordable pay income contributions of £210 per month for a 3 year period.