There has been a number of news articles published recently, where individuals who have declared themselves bankrupt have failed to comply with the ‘bankruptcy restriction’ rules, which is a criminal offence.
Mr Garner, of Planet Confidential Limited was disqualified and fined £3,000 for running a company while still bankrupt. He breached his bankruptcy restrictions by acting as a director of a limited company and failing to provide information which was reasonably required by the company liquidator.
Bev Budsworth from The Debt Advisor adds, “frequently we come across individuals who incorrectly believe they can opt for bankruptcy and put their spouse of other family member in the director’s role. What they don’t realise is if they become involved in the promotion, formation or management of a limited company and they are bankrupt, they are breaching bankruptcy restriction rules.”
Breaking any of the bankruptcy restriction rules constitutes a criminal offence and can mean that at the very least your discharge from bankruptcy is suspended indefinitely. So instead of bankruptcy being a quick fix with discharge after 12 months, it becomes a lot more complicated and can continue for years.
The bankruptcy restrictions mean that you cannot:
- Borrow more than £500 without telling the lender you’re bankrupt
- Act as a director of a limited company
- Create, manage or promote a company without the court orders permission
- Manage a business with a different name without telling people you do business with that you’re bankrupt
- Work as an insolvency practitioner (an authorised debt specialist)
- You may not be a Member of Parliament in England or Wales
In addition to the above, a bankrupt must cooperate with the person managing their bankruptcy – the Trustee, by providing him or her them with any information they may ask for.
As mentioned the Bankruptcy term is normally 12 months – starting from the date of bankruptcy. That is unless the person’s discharge is suspended because they have not co-operated with their Trustee. Also the Trustee a duty to investigate the circumstances surrounding the bankruptcy. If they encounter information or activity which needs investigating, the Trustee must report this to The Insolvency Services who oversee all bankruptcies and they can apply for an order called a Bankruptcy Restriction Order “BRO”which will mean that while the BRO is in force, (between 2 and 15 years) there are certain bankruptcy restrictions that will apply.
The type of matters which could give rise to a BRO include:
- incurring debts that you knew you had no reasonable chance of paying
- giving away assets or selling them at less than their value
- deliberately paying off some creditors in preference to others
- gambling or making rash speculations or being unreasonably extravagant
- failing to keep or produce records that would explain a loss of money or
or property;
- fraud or fraudulent breach of trust;
- causing your debts to increase by neglecting your business affairs
- failing to supply goods or services that have been paid for;
- carrying on a business when you knew or ought to have known you could not pay your debts.
The more blameworthy your conduct, in the court’s opinion, the longer the BRO is likely to last.
If you are subject to a BRO, and break the restrictions outlined to you, you may be prosecuted and if found guilty receive a criminal penalty including a fine, or even imprisonment.
Further reading on bankruptcy and the Bankruptcy Restriction Order can be viewed on our bankruptcy explained page.
Bankruptcy is often considered the last resort for people with serious debt problems especially if you have a property to protect. There are solutions which can protect your property and allow you to repay your debt in affordable monthly instalments.
Talking to someone who understands the stress of debt will help. If you feel as though Bankruptcy is the only option and you would like us to assist you, we charge £500 +VAT for assistance in preparing the debtor’s petition paperwork and £600 +VAT if you have a pending charging order.
Do call us today on our freephone number 0800 0851 825 to speak with one of our advisors. If you’re calling from a mobile, you can reach us on 0161 868 2500.
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