| ign="center"> | | | | If a replacement director is not available, then the |
| Bankruptcy can be an extremely effective way of | | | | company may be forced to close. As such, many |
| dealing with a serious debt problem. However if you | | | | company directors choose to avoid bankruptcy if they |
| are managing a company there could be serious | | | | can and opt for an alternative debt solution such as an |
| implications. We look at the issues for Directors and | | | | individual voluntary arrangement (or IVA). |
| Sole Traders considering bankruptcy as a debt | | | | Sole traders may find banking difficult |
| solution. | | | | If your business is not a limited company, then the |
| Bankruptcy can be an extremely effective way of | | | | effects of bankruptcy are very different. |
| dealing with a serious debt problem. However if you | | | | You will be able to continue to operate as a sole |
| are managing a company there could be serious | | | | trader business without the burden of your personal |
| implications. | | | | debt. As such bankruptcy can be a very useful tool |
| The very idea of bankruptcy has overtones that often | | | | for self employed people who have no property to |
| put people off even considering it. It can however be a | | | | lose. |
| very useful debt solution in a number of situations. If | | | | However, one of the problems with declaring |
| you declare yourself bankrupt, all of your unsecured | | | | bankruptcy as a sole trader is that you may have to |
| debt will be taken away from you. You are generally | | | | close your business bank account. If your business |
| bankrupt for 12 months after which you are | | | | account is with the same bank as your personal |
| discharged debt free. | | | | account and you owe money to this bank, the |
| Of course, where you have considerable equity in a | | | | business account may be frozen or closed after you |
| property, it is highly likely that the house will have to be | | | | declare bankruptcy. |
| sold. | | | | Once bankrupt, you can open a new personal bank |
| One the other hand, if your house has no equity in it | | | | account, but it may not be easy to open a new |
| you should be able to keep it. As such, if you are in | | | | business account. |
| business or are a company director and have no | | | | One solution to this problem is to open two new |
| home equity, bankruptcy might seem like an attractive | | | | personal accounts, one for personal, and one for |
| solution to you. | | | | business activities. However, as your credit rating will |
| However, there are other implications for business | | | | be affected, it is unlikely you will be given overdraft or |
| people that you will need to be aware of: | | | | credit card facilities for either of these accounts. |
| Company directors who are bankrupt must resign | | | | Overall, whether you are a company director or sole |
| A bankrupt person cannot act as a limited company | | | | trader, declaring bankruptcy may have a significant |
| director or in the capacity of managing a limited | | | | impact on your business. Bankruptcy can be a very |
| company. | | | | good way of resolving personal debt. However, if you |
| For this reason if you want to declare bankruptcy, the | | | | are considering this as a solution, you will need to plan |
| only way that you can keep your business running is if | | | | carefully to ensure that any negative impact to your |
| you appoint a new director who can take over from | | | | business is minimised. |
| your duties while your bankruptcy remains in place. | | | | |