Published in Debt Advice Features on Saturday, February 03 2007

Personal Bankruptcy is a term used when a person wishes to declare bankruptcy, or so it is thought, there is no difference if you are an individual person, a sole trader, or limited company the bankruptcy effects are the relatively the same.

The only real difference is the way the bankruptcy is administered and how it would affect a persons life or business

An Individual becomes bankrupt

The affects on a person (whether employed or self employed) in bankruptcy vary and is completely dependant on the persons circumstances and their conduct leading up to bankruptcy. However it means that their bankruptcy will be recorded on the Insolvency Register, along with having the restriction set upon them as undischarged bankrupt. The interview with their bankruptcy Trustee is more likely be done over the phone, and correspondence done via the post, obviously when it comes to assets these may be dealt with in person. If there are no assets then there will be no real investigation into the person’s financial affairs unless the Trustee deems it necessary dependant on the person’s financial circumstances.

Sole Trader becomes bankrupt.

The affects of sole trader in bankruptcy has the same “personal” affects as anyone else in bankruptcy, however because they are trading or recently traded the interview with the bankruptcy Trustee will probably be done in person and correspondence and request by the trustee are more likely to be done in person, a sole trader business may be closed if the business is heavily reliant on the business credit and if there are any employees then they could be dismissed.

Another restriction is that the sole trader cannot trade as any other name other than the one they were made bankrupt under, without disclosing to everyone they do business with that they are bankrupt.

Limited Company becomes bankrupt

A limited company is classed and is effectively a “person” all financial liability lies with the limited company (with exceptions, such a director acting as a guarantor) again the “personal” effects of the limited company in bankruptcy are relatively the same as an individual or sole trader, however the administration of the bankruptcy is very different, the business will be highly investigated, along with any employees, and directors interview, the bankruptcy procedure for a limited company is very different and far more strict than if an individual or sole trader becomes subject to bankruptcy.
Personal bankruptcy affects everyone regardless of your position in society; it is good that when we use the term personal bankruptcy we know that we are referring to an individual who does not run some form of business.