How does being insolvent affect my employment?
By Administrator 26 February, 2014
For many people, being insolvent has no impact on their employment whatsoever. If you are an employee, ie you are not running your own business, and you do not need to a trade or professional license to do your job, there should be no reason why your employment should be affected by an act of bankruptcy. But we always recommend that you read your employment contract thoroughly and, if in doubt, contact your HR department.
Things can become a little more difficult when you are working for yourself. The first and most obvious problem is that if you commit an act of bankruptcy you will have a default on your credit file, which will affect your ability to get supplies on credit. If you are bankrupt or in a debt agreement it is important to note that is an offence to gain credit over a certain amount without disclosing that fact.
Professions that require a license can also be affected by an act of bankruptcy. Whilst the Bankruptcy Act itself does not impose any restrictions, your particular licensing authority may have restrictions that it places on people who have gone bankrupt or entered into an arrangement under the Act. If your profession is listed here and you are considering declaring yourself bankrupt, you should contact the relevant authority to find out if your license will be affected.
And most importantly, if you are the director of a corporation, you will be automatically disqualified if you declare bankruptcy or enter into a Personal Insolvency Agreement. You would have to entrust the directorship to someone else for the duration of your arrangement, and ensure that you comply with all of the terms so that you can be re-appointed once it has been completed.
It is important to note, however, that each act of bankruptcy carries with it different consequences and so, depending on what it is that you enter into, you may still be able to carry on your business relatively free of side-effects. For example, if travelling overseas is a requirement for you, this would be affected by bankruptcy, but not by a Debt Agreement or Personal Insolvency Agreement. Restrictions on running a business as a sole-trader and applying for more credit apply to both a Debt Agreement and a Bankruptcy, but there are no similar restrictions if you enter into a Personal Insolvency Agreement. And whilst you would have to step down as director under a Bankruptcy or Personal Insolvency Agreement, you would be able to remain in your position were you to do a Debt Agreement. Given the different rules which apply to the different solutions, careful thought and planning needs to be given before you enter into any arrangement. (read of comparison of debt solutions here)
If you are concerned that your employment might be affected by an act of bankruptcy it is essential that you seek immediate professional advice. The factors that will affect the path you choose to take are numerous, and making the wrong choice could impact your livelihood tremendously. The team at Debt Free Australia are trained in all areas of personal insolvency, and can help you to find the solution that will have as minimal an impact on your employment as possible. Call us today on 1800 676 598.