What is bankruptcy?

Bankruptcy is a legal procedure where you are deemed unable to pay your debts as they fall due. The procedure can be instigated by your creditors, but is often instigated by the bankrupt themselves. It means that, for a period usually lasting 12 months, you cannot be a director or involved in the financial management of a company without the leave of the court and you cannot incur more than £500 of credit without informing the lender that you are a bankrupt.
There are also a number of jobs which are barred to a bankrupt. Whatever your job, it’s important to look at your contract of employment because increasingly these include a clause giving your employer the option of making you redundant should you be declared a bankrupt.