Bankruptcy and self employment

Louk

Are you allowed to carry on like business as usual while you go bankrupt? I have a few people wanting to place orders on my tiny craft business.... My business is not involved or the cause of my bankruptcy.

lilybankrupt

My understanding is that normally you are allowed to carry on with self employment (as a sole trader not as director of a limited company) when bankrupt.

There are various rules about having to trade in the same name under which you went bankrupt.

There are some practical issues to consider though such as...

the rules about credit include trade credit
tools of the trade are exempt from the usual assets rules, although I was told by an insolvency practitioner that if you have very expensive assets but a very small income from those assets the OR might want to sell the assets
a normal business bank account is pretty much impossible when bankrupt (Cashplus or Cardone might be the answer)
PayPal seem to vary on this one but a lot of people get their business accounts closed, which makes trading online very difficult

So in theory you can do it, in practice it might be difficult. But I'm self employed and will probably have to declare BR this year and I'm going to give it my best shot!

Louk

Thanks, yes I was aware of the difficulties... Petrified about the whole paypal thing, that could devastate my business... fingers crossed.

banksshouldworry

I'm self employed and went BR a couple of weeks ago and the OR and examiner havent asked about my PayPal account at all. I'm not going to bring it up either. I hope it stays that way for you too.

dlites

Hi i went bankrupt in October 2013 and i am a self employed crafter. I have only been trading a short while so my website was in maintenance mode and not yet up and running. The Or said that if it was up and running they would shut it down. I am not allowed to trade online but can do craft fairs and face to face sales until discharged.

Louk

That's funny because I have since spoken to my OR who has said I can carry on as normal.... Which means trading online but can't change anything about the business while I am BR.

dlites

That's strange as im in the same boat as you as my business is not the cause of my bankruptcy.

lilybankrupt

Yikes the bit about not being allowed to trade online is worrying. Did the OR give a reason?

Re: not changing anything about the business, do you mean the name or does it go further than this eg types of products sold?

Louk

I can't recall 100% I think just the name...

I don't have my own website, I tend to sell through facebook, etsy etc...perhaps that will make a difference to your OR?

lilybankrupt

I don't have my own website either, like you I sell via marketplace type sites. I was hoping to launch my own website though - might make sense to leave this until after discharge I guess, or at least until I have spoken to the OR after BR.

I was wondering about the marketplace sites though. If you have to declare your name eg Bob Smith trading as Crafty Things, what happens if the marketplace site only displays Crafty Things? Are you then in breach of BR rules even if you have no control over it?

On a related point, I phoned PayPal (anonymously!) this week to ask about their policy on business accounts and bankruptcy. The chap told me that a 'standard' business account is fine, a 'pro' account would probably be closed. Which sounds great, except it seems to be random as to whether PayPal keep your account open or not in reality.

I'm also worrying about stock being sold by the OR as unlike tools of the trade stock is not an exempt asset.

That'll teach me to google stuff, so much for a nice relaxing Saturday night after a busy work week :mad:

Louk

Hmmmm I was allowed to keep my stock but I only had a small amount anyway as most of the pieces I make are heavily personalised. Most handcrafted items would be quite difficult for the OR to make money on I guess...

Interesting point regarding paypal... Fingers firmly crossed here!