Bankruptcy – how it affects you :Cross Stitch – Money, tax and benefits

If you are made bankrupt, you will have to hand over your assets (property, shares etc). These will be sold or disposed of to help pay your bankruptcy debts. Find out what assets are affected and what can happen to your home, income, pension and bank accounts.

When you are made bankrupt, you have to hand over any assets of value to a person appointed to manage your bankruptcy. This person is called your ‘trustee’ and is usually:

• an Official Receiver – an officer of the bankruptcy court
• an insolvency practitioner – an authorised debt specialist

The assets you can keep

When you are made bankrupt, you should provide details of your assets, debts and financial affairs to the Official Receiver. This information will be used by your trustee to help decide how best to pay your bankruptcy debts.

You must co-operate and provide information on all your assets and debts. You can usually keep the following items, unless their individual value is more than the cost of a reasonable replacement:

• material or equipment you need in your employment, business or vocation – for example, tools, books or a vehicle
• items you and your family need in the home – for example, clothing, bedding, furniture or household equipment

Your trustee may apply to the court for an order restoring a property to them if you disposed of that property in a way which was unfair to your creditors. For example, you transferred a property to a relative for less than it’s worth. They can also claim any property you inherit or obtain while you are bankrupt.

Find out how your home can be used by your trustee to help pay your bankruptcy and if you can stop it being sold.

If you are self-employed, your business is normally closed down and any employees are dismissed when you are declared bankrupt. Any assets belonging to your business will be claimed by the trustee unless they are exempt (excluded).

You will have to give the Official Receiver all your accounting records, but you are still responsible for completing your tax and VAT (Value Added Tax) returns.

Your employees can apply to the National Insurance Fund for unpaid claims like wages and holiday pay. Employees can also send a claim to your trustee for any money not paid by the National Insurance Fund.

There is nothing to prevent you from being self-employed, so you can start to trade again. However, you must follow the bankruptcy restrictions, including:

• you must not borrow more than £500 without telling the lender you are bankrupt
• you must not create, manage or promote a company without the court’s permission
• you must not manage a business without telling those you do business with you are bankrupt
• act as a director of a company

You will need to register again for VAT if you meet the registration requirements – you must not continue to use your pre-bankruptcy VAT registration number.