When a person is made bankrupt they become subject to the criminal law relating to bankruptcy. There are also a number of restrictions on the things that they are allowed to do.
There are a number of bankruptcy offences which may be committed by a bankrupt either before or after the commencement of the bankruptcy. The most serious offences carry a maximum term of imprisonment of 7 years and an unlimited fine. Bankruptcy offences include:
- Failure to disclose all of the property which is, or should be, comprised in the estate
- Failure to deliver property, books, papers and records to the Official Receiver or trustee
- Falsifying documents or records
- Making false statements
- Fraudulently disposing of property
- Absconding with property
- Obtaining credit in excess of £500 without disclosing that they are bankrupt
- Engaging in business under a business name used prior to the bankruptcy
There are defences to bankruptcy offences. In any case, if the bankrupt can show that they had no dishonest intention in committing the act in question they will not be guilty of an offence.
There are some restrictions that apply to all undischarged bankrupts. These include acting as a director of a company or being involved directly or indirectly in the formation or management of a company or being a trustee of a charity. A bankrupt can apply for permission to be a director whilst bankrupt.
There are a number of additional restrictions which apply where a bankrupt is subject to a bankruptcy restrictions order (BRO). An application to the court for a BRO may be made by the Secretary of State or the Official Receiver in the case of ‘culpable bankrupts’ which include people who have taken on credit when there was no possibility of repaying this or where they are otherwise to blame for the bankruptcy by deliberate acts or neglect causing financial loss.
A BRO will last for between 2 and 15 years and there is a ‘scale’ of serious conduct that the court take into account when deciding how long the restrictions should last for. In order to avoid the costs and uncertainty of the outcome of an application to the court for a BRO, there is a procedure whereby a bankrupt may agree to give a written undertaking to comply with bankruptcy restrictions and this has the same effect as entering into a BRO. Failure to comply with a BRO is a criminal offence.
Taking legal advice
Committing a criminal offence in the course of bankruptcy could lead to prosecution and possible imprisonment. The same may occur if an undischarged bankrupt acts in breach of bankruptcy restrictions or if a person who is subject to a BRO following bankruptcy fails to comply with this. If you are unsure as to how to proceed in relation to the legal restrictions placed on you by bankruptcy law, you should consider taking legal advice.
For more information proceed to What a bankrupt must do