Will My Boss Find Out I have Been Made Bankrupt

	Do you live in Scotland? As Scotland has its own legal system, distinct from that of England and Wales, laws relating to bankruptcy are different too. In Scotland, personal bankruptcy is known as sequestration.

	Will my boss find out I have been made bankrupt? NOTE: If you have serious problems with debt and are considering bankruptcy, it is important that you seek professional advice before doing so. Unless it is a stipulation of your contract, you are not obliged to tell your employer that you have made bankrupt. However they may well find out because being made bankrupt is a matter of public record. In addition to this, if you pay tax under the PAYE system, HM Revenue and Customs will usually apply a 'nil tax' code to you for the rest of the tax year in which you were declared bankrupt. This is because when you are declared bankrupt, it is your trustee - and not you - who will generally pay your debts, including tax. The law allows your trustee to ask you to agree to make regular payments from your income into the bankruptcy estate for a specific period of time - known as an Income Payment Agreement (IPA). If an agreement is not reached, your trustee can apply to a court for an Income Payment Order (IPO) to be made. Obviously, if no tax is deducted from your wages, you will be getting more money in your pay packet, but this additional money will normally form the basis of any IPA or IPO. The nil tax code does not mean that no tax is due, but your employer will be told not to deduct income tax from your wages for the rest of the tax year. HMRC applies nil tax codes for various reasons, including overpayment of taxes in previous years or in other employment, and the new tax code will not tell your employer that you are bankrupt, but it may well raise suspicions. The nil tax code only applies to the tax year that you are declared bankrupt - if you are declared bankrupt towards the end of March, the change in the tax code will be for such a short period, it may well go unnoticed.

Will my boss find out I have been made bankrupt?

NOTE: If you have serious problems with debt and are considering bankruptcy, it is important that you seek professional advice before doing so.

Unless it is a stipulation of your contract, you are not obliged to tell your employer that you have made bankrupt.

However they may well find out because being made bankrupt is a matter of public record.

In addition to this, if you pay tax under the PAYE system, HM Revenue and Customs will usually apply a 'nil tax' code to you for the rest of the tax year in which you were declared bankrupt.

This is because when you are declared bankrupt, it is your trustee - and not you - who will generally pay your debts, including tax.

The law allows your trustee to ask you to agree to make regular payments from your income into the bankruptcy estate for a specific period of time - known as an Income Payment Agreement (IPA). If an agreement is not reached, your trustee can apply to a court for an Income Payment Order (IPO) to be made.

Obviously, if no tax is deducted from your wages, you will be getting more money in your pay packet, but this additional money will normally form the basis of any IPA or IPO.

The nil tax code does not mean that no tax is due, but your employer will be told not to deduct income tax from your wages for the rest of the tax year.

HMRC applies nil tax codes for various reasons, including overpayment of taxes in previous years or in other employment, and the new tax code will not tell your employer that you are bankrupt, but it may well raise suspicions.

The nil tax code only applies to the tax year that you are declared bankrupt - if you are declared bankrupt towards the end of March, the change in the tax code will be for such a short period, it may well go unnoticed.

© Bankrupt.co.uk 2007. All rights reserved. Please note the contents of this website are for information purposes only and do not constitute financial advice. Please seek independent professional advice before taking action that may affect your financial well-being.