Insolvency Made Clear: A Guide for Debtors

Effect Of Bankruptcy
2.10 Running the bankrupt’s business
The bankrupt’s business, although not any tools of trade, will fall into the estate.
A Trustee might decide that it is in the best interests of the creditors for the
bankrupt’s business to be sold to a third party. This might happen if, for example,
the business is incorporated and it is possible to sell the shares of the company.
However, the Trustee is also able to run the business themselves, or appoint
a manager (including the bankrupt) to do so on their behalf. This creates an
opportunity for the bankrupt to offer their services running the business as they
were doing previously. However, since the bankrupt was not so successful at
running the business, otherwise they would not be made bankrupt, a Trustee
may be cautious before agreeing to this proposal.
A bankrupt is not prohibited from starting a new business in the same industry
provided they can do so within the constraints of bankruptcy, including a) not
being able to act as the director of a company, b) restrictions on the ability to
borrow as above, and c) many of the assets of the previous business will now vest
in the Trustee. The Trustee in Bankruptcy cannot compel the previous customers
to trade with them and not the bankrupt. The rules on after-acquired property
(to be discussed below) do not apply to property acquired by the bankrupt
in the ordinary course of their business (r10.125(4)), but the bankrupt must
share accounting and profit information with the Trustee.
If the bankrupt engages in business, they must trade under the name in which
they were made bankrupt (s360(1)(b) of the Act). This is similar to the restriction
on obtaining credit: it only imposes the obligation to disclose relevant
information.
2.11 Effect on immigration status
Due to s41A of the British Nationality Act 1981, in most circumstances, a person
applying for British citizenship must meet a ‘good character’ requirement. This
includes ‘consideration of financial soundness’. The Home Office guidance on
this requirement can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/770960/good-character-guidance.pdf.
An application will not usually be refused simply because the person is in debt.
However, the application form, Form AN, asks at question 3.14 “Have you ever
been declared bankrupt?”. The guidance explains that if the bankruptcy was discharged
over ten years ago, annulled or if the individual was the director of a
company that went into liquidation (presumably when insolvent) over ten years
ago, the application can be granted. Otherwise, the Home Office reviewer will
take into account the scale of the bankruptcy, the economic circumstances at the
time of the application, and make a judgement about whether the person was
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