Declaring bankruptcy is a last resort for most people, with effects impacting many areas of life, not least employment.
Being declared bankrupt doesn’t necessarily mean that people can’t continue their career, but it might affect which industry or sector they can work in and the type of work they can do. For instance, you cannot be a company director, a chartered accountant, a solicitor, a member of parliament, a school governor, estate agent, post office worker or a trustee of a charity if you are bankrupt. It might also be difficult to get a job in the civil service, security or the police.
There are restrictions on business owners who have been declared bankrupt, and it is a criminal offence to carry out certain roles with a history of bankruptcy. Some roles are allowed, but only with permission from the courts; you may only be a company director if you have permission from the court, and you cannot be involved in founding, managing or promoting a limited company without court permission. For those self-employed or in a partnership, you must inform everyone you do business with that you have previously been declared bankrupt and give them the name that you were trading under when the bankruptcy took place.
If you are already in employment when you are declared bankrupt, your employers are unlikely to be informed. However, it is important to check your contract to determine whether bankruptcy might restrict your role, because some positions require a clean credit rating.
If you own a business and are declared bankrupt the bankruptcy trustee will be placed in charge and the business closed, all employees will be dismissed, and any assets sold. If you are self-employed you may begin to trade again immediately, but you might find it difficult to get credit, this could make trading in certain sectors difficult.
While it might be tempting to keep your bankruptcy history from potential employers, your name will appear on the insolvency register for three months after the bankruptcy has ended (the point at which you are no longer responsible for debts accrued before bankruptcy), this is usually a year.
In addition, bankruptcy will appear on your credit report for at least 10 years after the declaration, which will affect your ability to work in certain roles or get credit.
Bankruptcy can affect future employment but with robust screening practices, employers can protect their business and mitigate risk. Bankruptcy is easy to uncover, and most employers will find out should it affect your permission to carry out your job. By being honest, candidates can ensure that their bankruptcy won’t interrupt their future roles.