A failed business venture.

A debilitating long-term illness.

Poor accounting practice.

There are many different reasons that a person will declare themselves bankrupt.

It can be one of the most stressful times in someone’s life and is often seen as the only alternative, when all other avenues have been exhausted.

By filing for bankruptcy, the immediate issue of crippling debt can be alleviated but what are the implications in terms of employment?  

It is not permissible to continue as a Barrister, Chartered Accountant, MP, Local Authority official or Justice Of The Peace. And anyone employed by the Police or Armed Forces can severely hinder their career prospects.

Furthermore, many roles in the financial sector can become untenable if you are declared bankrupt. But the majority of people who file are not usually from one of the well regarded professions above.

What about small business? The sole proprietor? The limited company director? Is it possible to pick up the pieces after bankruptcy and be gainfully employed?

As a sole proprietor or businessperson you will, most probably, have your assets such as your house and/or car, repossessed. The bankruptcy order now only lasts for 12 months, in which time you are barred from saving, but repayments can continue for up to 3 years.

So with no private funds or assets for such a substantial period of time it is unlikely that you would be able to continue or relaunch your business.

And obviously, there would be no assistance from financial institutions in addition to the serious damage done to your credit rating (which would stay on record for up to 6 years).

You are also not allowed to act as a Limited Company Director or be involved in the promotion, formation or management of a limited company without consent from the courts. Moreover, your decision to declare yourself bankrupt would be publicly announced in the local paper.

So if you are currently the director of a company, going bankrupt could have serious implications for your business as well as for you.

If you decide to seek employment within another organisation or company there can sometimes be problems too. Many large corporate businesses will ask prospective employees if they have ever been declared bankrupt. Some will even run financial credit checks and background searches to confirm the information given.

This can then lead to limited opportunities when it comes to promotion. And there have also been examples where it would seem that bankruptcy has stopped candidates from being employed altogether.

But for many, bankruptcy is not actually the only alternative. A lot of people have avoided declaring themselves bankrupt by turning to other means of reducing their debt.

There are numerous financial institutions which now offer debt consolidation or you can set up an IVA (Individual Voluntary Arrangement) through a licensed Insolvency Practitioner.

An IVA is a legally binding agreement between you and your creditors to make reduced payments towards your total debt. Usually, these repayments last for 5 years and pay off a percentage of what you owe. After this time the debt is considered repaid in full.

As bankruptcy can potentially limit your employability it would seem prudent to investigate these other options before deciding to declare.