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Can a person who is bankrupt be an employee?

Bankruptcy is being reversed so what are the options in the meantime?

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A client has incorrectly been made bankrupt and this is in the process of being reversed however it may take some time.

Since the bankruptcy she has operated as a sole trader but is finding that due to the bankruptcy things are alot more expensive (insurance etc and getting credit is obviously impossible).

There is a Limited Company which was set up a while ago with other family members as shareholders and directors and once the bankrupcy has been reversed she will make herself a director/shareholder and continue her business using this.

The question is, in the interim period, can she become an employee and all her assets be transferred into the Limited Company from the sole trader or would this not work?

I have no experience at all in bankrupcy/insolvency so any advice would be most appreciated.


Replies (7)

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By lionofludesch
19th Jul 2019 21:29

Yes, of course she can be an employee.

How else are bankrupts expected to earn a living ?

Mildly surprised that she's been trading, though.

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By SteveHa
19th Jul 2019 23:32

Transfer of assets may be a problem if as a part of the bankruptcy they are assets available for realisation.

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By SXGuy
20th Jul 2019 07:24

Please tell me how someone can be bankrupt by mistake?

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By zebaa
20th Jul 2019 07:39

While they can become an employee, they should not become a director ( whilst being an undischarged bankrupt) . They will likely have a new tax code, with the start basis of taxation being the date they went bankrupt. This may mean reduced tax this year. If you have you unwind this though, be aware that tax may become due.

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By bernard michael
20th Jul 2019 09:30

She cannot be involved in the managing or running the company but can be an employee accepting instructions from the managers/directors

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Lisa Thomas
By Insolvency Practitioner
22nd Jul 2019 13:07

She can be an employee, she cannot be part of the promotion, formation or management of the Limited Company and needs to keep at arms length from this.

There is always a chance the annulment may not go ahead.

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By jon dickinson
23rd Jul 2019 17:23

I believe her earnings would be capped at c £25k pa with any payment above this open to challenge by her Trustee in Bankruptcy. She may also be restricted as to what car she can drive (I think it's value should be less than £4,500 from memory!)

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