Published in Debt Advice Features on Saturday, December 09 2006

This article gives you a brief insight into how bankruptcy may or may not affect your vocation. There are certain types of employment that bankruptcy will affect and this article is designed to shed some light on the matter.

If you are an employee (PAYE) dependant on the industry you work in and what your employment contract states, then you will normally be able to continue in the same as before and in most cases your employer will not even be aware that you have been declared bankrupt.

However all said, before making the decision to go bankrupt always check your employment contract.

If there is a condition or a clause in your employment contract that in the event you are declared bankrupt your employer would be notified and your employment contract may be terminated.

If you are employed and are paying tax under PAYE (Pay As You Earn), once you are made bankrupt you should contact your local tax office and ask them to put you onto a Nil tax code immediately after your bankruptcy order.

When you are paid you should receive your full entitlement of your gross salary, which you will not pay income tax for the remainder of the current tax year.

If for whatever reason this did not happen and you paid tax after your bankruptcy order then you should contact HM Revenue and Customs, and ask for a refund of the tax you paid from the date of your bankruptcy up until the nearest financial tax year.

The situation is different if you are self employed, sole trader or working on your own, you may be able to carry on as you were before, e.g. If you are a taxi driver, construction worker etc. You should be allowed to carry on as you were prior to your bankruptcy order.

In certain professions where you are self employed such as accountancy, estate agencies or a member of professional body or guild, becoming bankrupt could and would likely sever your links with the professional bodies and prohibit you from continuing to practice while an undischarged bankrupt.

If you employ staff through your business and a sole trader; if you own any trading stock of significant value, or your business totally relies heavily on trade/business credit then the Trustee in bankruptcy will probably close or sell the business as an asset.

If you are self employed, all your tax duty should be paid directly to HM Revenue and Customs, all the tax will no longer apply to the tax year of your bankruptcy order. Your tax duty will start from the following tax year.

Any tax that is taken from the date of your bankruptcy order and until the next financial tax year, in most cases you will not receive any of the money, this will or should be paid directly to your Trustee in bankruptcy.