What effect can it have on your finances?
A bankruptcy restriction order (BRO) is a legal order from the court that extends the length of time you are subject to bankruptcy restrictions. This order can be applied for a number of reasons, lasting anywhere between two and 15 years. In most cases, it is applied due to reckless, dishonest and fraudulent behaviour.
When filing for bankruptcy, it is essential you are completely honest with your trustee and disclose all financial information. Failure to do so or even attempting to hide assets can result in a bankruptcy restriction order.
The restrictions placed on a person in bankruptcy are similar to the restrictions during a ‘normal’ bankruptcy procedure. You will be unable to:
- Obtain credit for more than £500 without informing the lender that you have been placed under a BRO;
- Attempt to start up a company or take the position of director at a business without the explicit permission of the court;
- Set up as as sole trader/partnership without informing those you are entering into business with about the BRO.
Of course, there are far more reaching consequences of the bankruptcy restrictions order. For instance, your creditors will be informed of the bankruptcy restriction order. Further to the former, your details will also be published and made available on the Insolvency Register.
This will have a significant effect if you work in a professional field and will also likely prevent you for dealing with client monies. Similarly, the court will issue a notice about your bankruptcy restriction order, which may also reach local news – particularly if you are a noted business person within an area.
What causes a BRO?
As mentioned earlier, the official receiver has the ability to apply for a bankruptcy restriction order in any instances of fraudulent or dishonest behaviour. They can ask the court to look into certain behaviours and to whether a BRO is appropriate. These behaviours can include, but are not limited to:
- Continuing to incur debts knowing you do not have the ability to repay;
- Selling assets at a low market value;
- Giving assets away;
- Gambling or continuing to make expensive purchases;
- Providing false details to obtain any type of credit;
- Neglecting business affairs which sees the debts rise;
- Not cooperating or sharing all financial details with your bankruptcy trustee/official receiver.
When can it be made?
The official receiver can only apply for a bankruptcy restriction order prior to your formal discharge from bankruptcy. This will automatically occur after 12 months, unless the official receiver has applied for your discharge to be suspended, which will often be the case if you have not cooperated with their investigations.
How should I respond to the official receiver?
The consequences of a breaking your bankruptcy restrictions can be huge. Doing so could see you enter bankruptcy restrictions for a period up to 15 years, which can severely affect your ability to gain credit and perhaps even a job – particularly if you were a former director or work within the finance industry. Breaches of the BRO can result in fines or even a prison sentence, should the offences be severe. Generally, the punishment fits the offence.
If you receive a letter from the official receiver advising they are going to apply for a BRO you can either challenge this when the matter goes before the court or you can accept the findings and negotiation a bankruptcy restriction undertaking (BRU). A BRU is generally shorter than a BRO and avoid the need to go to court. It is sensible to agree to this if you accept the actions you have taken were inappropriate.
If you are seeking debt management advice regarding a bankruptcy situation, our BusinessRescueExperts can help to identify a solution to your financial issues.