Ability to trade in IVA and Bankruptcy
Summary: Ability to trade - This article explains how bankruptcy and Individual Voluntary Arrangements (IVAs) may affect an individual's ability to trade. It will also clarify where details are published and logged.
Ability to trade when bankrupt
When an individual is declared bankrupt, there are a number of restrictions imposed, that could affect an individual's ability to trade. It is usual for any partnership to be dissolved immediately, and the bankrupt may not act as a company director while the restrictions are in place. Furthermore, the individual may not have any involvement with the setting up, running or promotion of any business without the courts express permission. There are also some professions that a bankrupt may be excluded from (this is by no means an exhaustive list):
- Chartered Accountant
- Member of the Law society or a Lawyer
- Stoke Broker
- Estate Agent
- Insolvency Practitioner
- Pub Landlord/Licensee
- Member of Parliament or the local authority
Anyone in one of the above professions who find themselves facing bankruptcy should immediately refer to their contract of employment as they could face immediate dismissal.
How long do these restrictions stay in place?
With Bankruptcy, these restrictions normally remain in place for 12 months. However, there may be certain circumstances when the restrictions are extended up to 3 years, this could occur if the debtor has shown severe neglect. Should the debtor break any of the restrictions while they are imposed, then the court could order an extension of between 2 and 15 years, depending on the severity.
Ability to trade during an IVA
Unlike bankruptcy, there are no restrictions surrounding an individual's ability to trade, as it is a private agreement between the debtor and their creditors. However, some professions still require to be notified of the situation, so it is important to refer to any contract of employment and be honest with employers. However, there is rarely any reason why the restrictions imposed with bankruptcy would apply with an IVA.
How confidential is an IVA and bankruptcy?
Both IVAs and Bankruptcy will appear on the credit record for a period of 6 years, as well as being entered into the Insolvency Register. The Insolvency Register is publicly available and therefore accessible by anyone. The key difference between bankruptcy and an IVA is that bankruptcy is also reported in the London Gazette which is also publicly available. The implications of this are that Bankruptcy would be far harder to conceal, especially in those professions in which a bankrupt may not work. In either case, whether it is an IVA or bankruptcy, it is important to be honest at all times with employers and check any contractual obligations.