I often hear people say that once they are declared bankrupt, that is the end of it. In reality, that is often where the real scrutiny begins.
A recent case reported by the Insolvency Service involved an individual who had been made bankrupt owing over £100,000. After the bankruptcy, he received an inheritance of over £100,000. Instead of declaring it, he transferred the money to friends and family. Not £5,000 or £10,000. Over £100,000. The intention was to keep those funds out of reach of creditors.
What followed was not a warning or a request for repayment. He was sentenced to 2 years and 2 months in prison. His partner, who had also received funds during her own bankruptcy, received a suspended sentence.
This is where the seriousness of bankruptcy is often misunderstood. It is not simply a financial reset. It is a legal process with strict obligations, and those obligations do not stop once the order is made.
Once you are bankrupt, you are required to disclose everything. That includes any money you receive afterwards, whether it is earnings, assets or something unexpected like an inheritance. The Official Receiver is appointed to review your financial affairs and ensure that all available assets are identified and applied for the benefit of creditors. That duty of disclosure is ongoing. It does not just apply on the day of the bankruptcy order. It continues throughout the bankruptcy period. Any change in your financial position, particularly something significant like an inheritance, must be reported.
Trying to move money out of the way, even with the intention of sorting it out later, is exactly the type of behaviour that will be scrutinised. These transactions are not difficult to trace. Bank accounts are reviewed. Transfers are followed. Patterns are identified. Where funds are moved to connected parties such as family members or close associates, those transactions will be looked at very carefully. And once the picture is clear, the issue becomes one of intent. In this case, the movement of funds was seen as a deliberate attempt to avoid creditors. That is what took the matter from a financial issue to a criminal one.
It is also important to understand that the Official Receiver has powers to reverse transactions in certain circumstances. Payments made to others can be challenged, and individuals who have received funds may be required to return them. That in itself can create further pressure and complication, particularly where relationships are involved. These situations rarely involve just one person. Family members and friends who receive funds can find themselves drawn into the process, sometimes without fully understanding the implications at the time.
So, what should have happened in this situation? The correct approach would have been to disclose the inheritance to the Official Receiver as soon as it was received. From there, the position could have been assessed properly. The funds may have been used to repay creditors, either in full or in part, depending on the overall circumstances. That may not feel like an ideal outcome, particularly where the money was intended for personal or family use, but it keeps the matter within a controlled legal framework. There is often more flexibility than people expect, but that only exists where there is transparency from the outset.
Where individuals get into difficulty is when they try to take control of the situation themselves. Moving funds, delaying disclosure, or attempting to ringfence money for later use may feel like a practical solution in the moment. In reality, it removes the ability to explain matters properly and significantly increases the risk. What may start as a decision made under pressure can quickly become something that is viewed as dishonest once investigated. And that is the turning point.
Because once intent is questioned, the matter is no longer just about the money. It becomes about conduct.
The reality is this. Bankruptcy does not remove responsibility. If anything, it increases the level of scrutiny applied to your actions. Decisions made during that period are looked at very carefully, often with the benefit of hindsight and full access to financial records. What may have felt like a short term solution at the time can, when reviewed later, be treated as a serious breach of duty. And once that line is crossed, the consequences can be severe. Not just financially. But personally.
Disclaimer
This article is provided for general information purposes only and does not constitute legal or financial advice. Each situation will depend on its own facts and specific circumstances, and you should not rely on the above without taking appropriate professional advice.
If you would like to discuss your situation in confidence, please contact:
Navigate Business Recovery Limited
Office: 0330 236 9937
Mobile: 07961 116321
Email: vee@navigatebr.com