Freelancers, don’t do a Boris Becker if bankrupt – instead play it straight

Bankruptcy is one of those things in life that those who end up declaring it, including sole trader freelancers, often think at some stage -- before their problem debt got out of hand; ‘It Won’t Happen To Me,’ writes Gareth Wilcox of Opus Business Advisory Group.

But there is right now a welcome deterrent to this sort of ‘them, not me’ attitude because even one-time multimillionaire, former commentator for the BBC and tennis legend Boris Becker has been in the dock owing to his bankruptcy a few years back.

Off the court, what happened to Boris Becker?

As has been widely reported this month, Boris Becker has been found guilty of four charges under the Insolvency Act, relating to his bankruptcy which started in 2017.

The charges include removal of property, two counts of failing to disclose estate, and concealing debt. In short, Boris has been found guilty of hiding assets from his appointed ‘trustee’ in bankruptcy.

While some people may wonder how a sportsperson of Becker’s impressive standing may have found himself in the position of being bankrupt, there have actually been similar examples in recent years, including several bankruptcy cases involving the Premier League’s top footballers.

Seven violations  

There are several bankruptcy offences which can be committed by a bankrupt, including the following seven:

  1. Failure to deliver-up property to the official receiver or trustee
  2. Concealment of debt from the official receiver or trustee
  3. Failure to account for, or explain, loss of property
  4. Concealment of records
  5. Making false statements
  6. Destruction, mutilation, falsification of records,
  7. Absconding with property.

Cooperating with 'the umpire' (aka 'the trustee')

A person who is bankrupt has a duty to cooperate with their trustee, whose role is to maximise the assets available to try and pay the creditors of the bankrupt as much as possible. 

The above provisions are self-explanatory, and it does not take a great deal of imagination to consider how each would impede the trustee from fulfilling their duties!

So the above offences are designed to ensure that a trustee can carry out their obligations, and it is worth remembering if you’re a sole trader who cares about their reputation -- a trustee has the power to publicly examine a bankrupt in court. 

Contempt of court

And if a bankrupt fails to submit to such an examination they will be guilty of a contempt of court, which can and does lead to imprisonment. N.B. Often a judge will order that they be imprisoned until their content is ‘purged’ i.e. remedied.

The above contempt of court offence is in addition to the offence(s) committed by an individual who (before they are discharged), breaches one or more of the bankruptcy restrictions placed on them, including:

  • Acting as a director of a limited company, creating, managing or promoting a company; 
  • Borrowing more than £500 without telling the lender of the bankruptcy;
  • Managing a business with a different name to that under which they were made bankrupt, without disclosing their bankrupt status.

You could summarise the above by stating that there are many ways in which a bankrupt individual could get themselves into varying degrees of hot water, as Boris Becker has found to his cost.

In tennis ‘you cannot be serious’ – unlike bankruptcy offence consequences which can be grave

So what are the consequences of being found guilty of a bankruptcy offence? The short answer is that the consequences can be extremely serious.  Although the three-time Wimbledon men’s champion, and former Number 1 tennis player in the world, has been bailed until April 29th 2022, Boris faces a maximum sentence of seven years’ imprisonment per count.

It remains to be seen how harsh the court will be in this instance, and it is worth remembering that convictions of bankruptcy offences are fairly rare.

The importance of a timely serve

The most straightforward way for a bankrupt individual to ensure that no offence is committed is that they are honest, and up-front with their trustee. 

This includes ensuring that as a bankrupt, they respond to enquiries promptly, in full, and serve-up any relevant assets/documentation in a timely fashion when asked to do so.

If they can afford it (or someone else is willing to pay), a bankrupt may wish to take legal advice on matters arising from their bankruptcy, and even if they cannot pay, they can seek free guidance from Citizens’ Advice.

There is an absolute defence of ‘innocent intention’ in relation to any of the bankruptcy offences if the individual proves that, at the time of the conduct constituting the offence, they had no intent to defraud or conceal the state of their affairs. As such, any person who acts reasonably and honestly ought to have no fear of criminal consequences arising from their bankruptcy.

Play it straight…from start to finish

Once an individual has concluded that they are going to apply for bankruptcy, honesty is certainly the best policy, and this continues to be the case from the start to the finish of the process. In fact, the process is likely to be over much faster if this policy is followed. The proof? Boris Becker is still feeling the impact of his bankruptcy five years on, whereas most individuals are discharged after 12 months.

As always, if a self-employed individual is concerned about any of the bankruptcy offences during the course of, or in anticipation of, their bankruptcy, they should take the proper professional advice.

 

26th April 2022

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