A look at bankruptcy from both sides of the pond

No matter which side of the pond you happen to be on, there are a million ways for your business to go under.

A recent study revealed that 95% of entrepreneurs believed that software and technology is essential for running a successful business. 45% of them acknowledged that they did not have the right stuff to succeed. As astounding as that is, history tells us that even more of those new businesses will fail to see their 18 month birthday.


Business failure speaks all languages and dialects. What happens after that is where things start to diverge. In both the U.K. and U.S., bankruptcy means essentially the same thing. But there can be substantial differences in the details. If you are a dual resident or expat, your familiarity with bankruptcy on one shore may be a liability on the other. What follows is a brief look at the similarities and differences between bankruptcy on both sides of the pond:

U.S. bankruptcy: A soft landing

Aerialists can practice ever more spectacular stunts when they know there is a safety net beneath them. That is what U.S. bankruptcy law provides the entrepreneur. One of the possible reasons why the U.S. produces Microsofts, Apples, Googles, Facebooks, Twitters, and Amazons is because there is always some sort of safety net providing a soft landing in case of catastrophic failure. Freedom to fail is a strong motivation to create.

Whether or not there is merit in this hypothesis, it is undeniable that the individual bankruptcy chapters: 7 and 13, are a bit less harsh than their U.K. counterparts.

As explained by Doan Law Firm: “These are the facts: Filing for Chapter 7 Bankruptcy often allows individuals to eliminate their debt without sacrificing any of their most important assets. That includes repossessions, personal loans, medical bills, and credit card bills. Wage garnishments can end, judgment liens can be removed, and bank levies can be recovered!”

In cases of foreclosure, there are still things that can be done to buy you more time, such as a short sale, mortgage modification, and title 11 protection. Chapter 13 is more of a debt reconsolidating. In the U.S. code, soft landings abound. There are few, if any, permanent drawbacks to bankruptcy in the U.S.

U.K. bankruptcy: A serious financial affair

The first clue that you are no longer in Kansas is that in the U.K., you are made bankrupt. In the U.S. you file for bankruptcy. While you can make yourself bankrupt in the U.K., it is also something that can be done to you. In the U.S., bankruptcy protects you from what creditors can do to you. When bankrupt, you cannot:

  • Borrow more than £500 without telling the lender you’re bankrupt.
  • Act as a director of a company.
  • Create, manage or promote a company without the court’s permission.
  • Manage a business with a different name without telling people you do business with that you’re bankrupt.
  • Work as an insolvency practitioner (an authorised debt specialist).

Rather than being protected, your assets will be sold to repay your debts. You can usually keep items needed for work, such as tools, and household items like clothes and furniture, provided they are not too expensive. You can also say goodbye to checkbooks and bank cards for any account that happens to be overdrawn at the time of bankruptcy.

Like Chapter 13 in the U.S., there are debt management plan options. You can get free, impartial debt advice to help you navigate the waters.

In the grand scheme of things, if you are going to go broke, the U.S. is a great place to do it. The landing is softer, which enables more risk taking. But in either case, bankruptcy should be taken seriously. In both cases, there is life after bankruptcy. You can start again with a clean slate. In either case, it is far better to get control of your debt before it takes control of you.

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