Being made redundant after bankruptcy

renegadefm · 17 July 2018 at 11:46AM

Hypothetical question really, but this nearly happened to me.

I just not long started my bankruptcy for £38.000 at the time, and was about to be made redundant which would see me ironically gain £27.000 in my redundancy package.

My question is would my redundancy money have gone to the OR? Which basically would leave me with nothing and no job.

Is there anyway I could have avoided losing it assuming it happened?

Thankfully the company I worked for at the time changed their minds just 2 weeks from my leaving date, so I narrowly avoided losing it to the OR anyway.

But what would have happened in reality?

TheGardener · 17 July 2018 at 9:31PM

From a post by DebtDoctor
From the Technical Manual.......

31.5.32 Redundancy payments
Where an individual is made redundant they may receive compensation for loss of employment covering, for example, a redundancy payment, payment in lieu of wages (see paragraph 31.5.35), outstanding wages and/or holiday pay. A redundancy payment is compensation for the loss of employment. Although the amount of the redundancy payment is related to past salary and the length of service it is not compensation for loss of earnings [Note 6]. A redundancy payment will be paid to a redundant employee even where the employee immediately starts alternative employment at a higher wage. As a result a redundancy payment is not income!; but property which vests in the trustee in bankruptcy. The official receiver should resist any attempt by the bankrupt to argue that a redundancy payment is part of his/her income.

PaulL2 · 17 July 2018 at 10:34PM

Yep you'd lose it, or most of it (you might be able to negotiate some living expenses for a while). You'd be in the same position and having never had the job in the first place. The OR won't let you be bankrupt with 27k in the bank.

Saying that, had you been made redundant, perhaps you could have asked a relative to bail you out 10 grand and annul the bankruptcy altogether before discharge.

renegadefm · 24 July 2018 at 3:22PM

@PaulL2 The thing is I went bankrupt for 38k and about 2 years into my bankruptcy, then I was almost made redundant which scared the life out of me, because here I am someone who has just made themselves bankrupt to try and start life again, and now I am in danger of losing my job and any redundancy money which was 27k, but obviously 11k short of paying back anything or canceling the bankruptcy.

The thing is I don't think 2 years into the bankruptcy I could have annul the bankruptcy anyway, plus I would be left ironically with a 11k debt.

How ironic would that have been getting 27k redundancy and end up owing 11k. It would be like going back to almost like I was when I was in debt before I went bankrupt. Quite a unique case I suppose you could say, but almost a reality to me.

I was literally 2 weeks away from leaving when I had the call I'm not longer redundant. Imagine my relief?

Being made redundant after bankruptcy

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