Notice of defaults: everything you need to know
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Before you decide on bankruptcy as a way to start handling your unmanageable debts, find out if it’ll affect your job.
If you are struggling with your unsecured debts and you’d like to explore the idea of bankruptcy, you should really find out whether it will impact on your job before making any decisions.
One of the questions we often get asked at Debt Advisory Centre is, ‘will bankruptcy affect my job?’ And the answer we give is, it depends. It feels like a lot of questions about bankruptcy have the answer ‘it depends’, but it’s not some kind of dodge, it’s true. Whether your job is affected by you being declared bankrupt, will depend on what it is you do and what you intend to do in the future.
The first thing to say is that when you speak to a debt advisor they will ask you about where you work now and your career aspirations. If there’s a chance that bankruptcy would have a negative impact on your work then we’d look at other debt solutions that perhaps would have less impact and therefore be more suitable – bankruptcy is just one of a number of debt solutions.
And one more point before we move on. It’s important to keep in mind that while bankruptcy can be an effective way for tackling unmanageable debts for some people, it does have serious short and long-term consequences – for example, on your credit history. Your debt advisor will run through both the disadvantages and the advantages to help you make your decision. You can read about the range of debt solutions on offer in the England, Wales, Northern Ireland and Scotland here.
Do I have to tell my boss that I’m declaring myself bankrupt?
Once again, the answer is it depends. For most occupations the answer is no, what happens in your private life and finances is just that, private! But, that changes if you work in certain areas of business, such as finance or banking. The best way to find out if you need to inform your employer of your intention to declare yourself bankrupt is to check your contract. If you have to inform them, they’ll be a clause in the contract that says so. However, if you are at all worried about how being bankrupt will affect your job, you may want to discuss it in confidence with your company’s HR department.
Which occupations are affected?
You’ll find that it doesn’t affect most occupations, especially if you’re not dealing with money. However, if you do have a job where you’re expected to provide advice to people about their finances, like and insolvency practitioner (IP) for example, sadly you’ll be out of a job because there’s a clause in your contract stating that if you’re made bankrupt you’ll have to leave. This is totally understandable, as most people will question how you could advise others on how to look after their money if you can’t even look after your own.
But working with finance is not the only area that declaring yourself bankrupt might affect. There are some other occupations that will probably have similar clauses written into the contract. These are:
• positions that are regulated, and require you to be registered or have a license, such as law, banking or accounting. This is because you may find that being bankrupt will make your membership of the professional association invalid, meaning you’d no longer be able to work. If you’re unsure whether your professional body would expel you for being bankrupt, as usual, call and ask before you decide on anything.
• roles that require you to work with financial products or money. This may be because your employer feels that your judgement has been compromised or that you may be tempted to resolve your own bankruptcy issues with dishonest actions.
• you work in the gambling industry in a licensed role, such as a croupier or dealer, as bankruptcy will automatically see your license cancelled. You can, however, apply to have your license again through the Gambling Commission. This is probably done to prevent you from getting yourself into a compromising situation.
• roles in the public services, such as police and the armed services. This is again to protect you from being put into a compromising position.
Other job issues?
Even if you don’t lose your job, you may find that your employer puts certain restrictions on your current role. So maybe you used to have access to the petty cash or payroll and now that’s been withdrawn. Again, the reasons for doing this are understandable – it prevents you from being put into a situation that could lead to you doing something you would never do, after all problem debt can make you feel like you have no way out. It’s not true of course, there’s always a solution, no matter how bad the situation is, but it often doesn’t feel that way when you’re experiencing it.
What happens if I run my own business?
If you run your own business then bankruptcy really is a last resort because you will usually have to hand over the reins to your bankruptcy trustee and your business will be shut down. This means your employees will lose their jobs and any assets you have will be sold to help pay off your debts.
If you are self-employed and you’re a sole trader, you will be allowed to continue trading. But, just because it’s allowed, does not mean it’ll be possible. For example, if you have a business that requires you to purchase stock, you may find it incredibly difficult to get credit, so won’t be able to stock-up. If, however, you have a business that provides a service, like copy writing, which doesn’t require the purchase of stock, you could continue trading with no problems.
However, even if you can trade, there will be certain restrictions placed on how much involvement you can have in the business. So you’ll have to get permission from the court if you want to be a company director or set-up, manage or promote a limited company. And, if you want to continue trading in a partnership or be self-employed, and the company name you currently trade by is different to the one you had when you were made bankrupt, you’ll have to tell everyone you do business with that you were made bankrupt under a different name.
A little warning!
It's definitely not a good idea to ignore these rules - it's classed as a criminal offence if you break any of these restrictions.
As we said, if you are considering bankruptcy as a way of tackling a debt problem it really is worth exploring the options with a debt advisor. It may be that, if it is going to have a big impact your working life, there are other debt solutions that are more appropriate.
If you want to chat through your options, you can contact the Money Advice Service. Or you can get in touch with one of our fully trained debt advisors using one of the contact us options on the left of the page.
by Shelley BowersBack to blog home