You may be concerned that you will have to stop your self employed business if you go bankrupt. This is not the case. You can continue to work as a sole trader with really very little impact to the way you operate.
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Going bankrupt does not stop you from running a self employed business. You can continue to work for yourself. As a sole trader, you will normally experience little or no change in your day to day activity, particularly if you work alone.
Perhaps you work in construction, drive a taxi or do any other type of work. It does not matter, you will be able to continue as normal. You just need to make sure you trade under your own name.
If you rent or lease a business premises, you need to be aware that your landlord will be informed of your bankruptcy. Your old lease agreement will be cancelled and you will need to agree a new one. Given you have been a good tenant, most landlords will not have an issue with this. If you want to leave the premises, it makes things simple.
If you have any direct employees who you want to keep on, some planning is required. Their employment contracts will have to be terminated on the date you go bankrupt. You can then re-employ them if they are still required. However, it’s important to get the timing of this right to ensure they do not end up out of pocket
If you have employees, make sure you speak to us before going bankrupt. We can advise on the process to follow.
You may own a works vehicle. Typically this might be a van but it could also be a car. The important thing is you drive it yourself and would be unable to do your line of work without it. In these circumstances you will be allowed to keep it as long as it is not of excessive value.
What is meant by excessive value? If you own it outright, you would normally be able to keep a works van worth £2000-£3000. However these figures could be higher depending on the nature of your self employed business.
If your vehicle is on finance and the amount you owe against the vehicle is more than its second hand value, the official receiver will not be interested in it. However it will be up to the finance company to decide whether you can keep it or not. Many companies will be happy as long as you maintain the payments. However some may decide to cancel the agreement. You need to check this beforehand.
You are only allowed to keep one vehicle. If you own more than one (perhaps used by an employee or contractor) you will have to give it up. The only way to keep it is “buy it back” from the Official Receiver for current market value.
You might decide to return your vehicle to the finance company. If so you will be protected against any shortfall still owed on the agreement. This will be included as one of the debts in your bankruptcy.
You may have taken a coronavirus bounce back loan which you are not in a position to repay. Perhaps your business has not increased as you would have hoped. This debt is included and written off if you go bankrupt.
Other business debts such as your business overdraft, credit card and loans will also be written off. Also debt owed to suppliers and incurred as a result of customer disputes.
Money owed to HMRC is also included. This means you can draw a line under these debts and carry on with your business with a clean slate.
Struggling to pay your bounce back loan? We can advise whether bankruptcy could be the right option for you. Give us a call (0800 044 3194) or complete the form below.