Bankruptcy raises questions for self-employed people that an employed person would not face, including what happens to business assets, whether you can keep trading, and when you can act as a company director again. Most of these questions are separate from the mortgage itself, but they shape how quickly you can rebuild the trading history a lender will later want to see.
This page looks at trading as a sole trader, director or contractor during and after bankruptcy, and how to build the evidence a remortgage application will need. For the general position, see remortgaging after bankruptcy, and for how self-employed income is assessed, see self-employed with bad credit.
On this page
This page covers
- Credit issue
- BankruptcyUsually stays on your credit file for 6 years from the bankruptcy date.
- Employment
- Self-employedLenders commonly ask for tax calculations and accounts covering one or more years.
Read the main guide: Remortgaging when you are self-employed and have bad credit
In short
- You can generally continue trading as a sole trader after bankruptcy, though some business assets can form part of the estate.
- Tools genuinely needed for your trade are often treated differently from other business assets, subject to your trustee’s agreement.
- A person who is an undischarged bankrupt generally cannot act as a company director without the court’s permission.
- Fresh accounts covering the period since discharge are usually the strongest evidence for a later remortgage.
Can you keep trading as a sole trader through bankruptcy?
Generally, yes, but your trustee takes an interest in your financial affairs while the bankruptcy is ongoing, usually for up to 12 months until automatic discharge. Business assets can form part of the bankruptcy estate, though equipment or tools genuinely needed to carry on your trade are often treated differently, sometimes allowed to be kept or replaced with something of similar value. This depends on the specifics of your case, so check with your trustee or an insolvency practitioner rather than assuming.
If your self-employed income continues during the bankruptcy, an income payments arrangement or order may require part of it to go towards your creditors, based on what you can reasonably afford.
What if you run a limited company?
A person who is an undischarged bankrupt generally cannot act as a director of a limited company, or be involved in forming or running one, without the permission of the court. This is separate from any bankruptcy restrictions order and applies to bankruptcy itself. If this affects you, speak to an insolvency practitioner or solicitor about your specific position before making decisions about a company you run.
Some contractors trade through their own limited company. If bankruptcy affects your ability to act as a director, working as a sole trader or through an umbrella arrangement may be worth discussing with your accountant while restrictions apply.
Building fresh trading evidence after discharge
| Stage | What a lender is likely to want | Where to look next |
|---|---|---|
| Undischarged | Not usually in a position to remortgage | See remortgaging with undischarged bankruptcy |
| Recently discharged | Early evidence of steady trading since discharge | See recently discharged from bankruptcy |
| Discharged some years | A fuller run of accounts and stable income | A wider range of lenders is more likely to be available |
General information only. Bankruptcy stays on your credit file for 6 years from the bankruptcy date regardless of discharge.
For most self-employed applicants, the priority after discharge is building at least one, and ideally more, sets of finalised accounts or SA302s that reflect trading after the bankruptcy, rather than relying only on figures from before it.
What happens to your home during bankruptcy?
On bankruptcy, your interest in your home generally passes to your trustee. If the trustee has not dealt with it within 3 years, it can revert to you under the Insolvency Act 1986. This is a separate process from your self-employed income and trading, but it affects when a remortgage on that property becomes realistic. Check your own case with your trustee if you are unsure where things stand.
Explaining your trading history to an adviser
- The bankruptcy date and discharge date
- SA302s or accounts for the years before, during and after bankruptcy
- Confirmation of your trustee’s position on any business assets
- Whether you are trading as a sole trader, director or contractor now
- Recent business and personal bank statements
What may affect a self-employed bankruptcy remortgage
| Factor | Why it matters |
|---|---|
| Discharged or undischarged | Undischarged bankruptcy is generally a bar to remortgaging; discharge opens up more options over time. |
| Time since discharge | A longer period of settled trading since discharge generally widens the choice of lenders. |
| Business structure | Sole trader, director and contractor positions are affected differently, particularly around company involvement. |
| Trustee’s position on business assets | What was retained, sold or replaced can affect how quickly trading resumed at a normal level. |
| Trading income since discharge | Fresh accounts covering the period since discharge carry more weight than pre-bankruptcy figures. |
| Ownership of the home | Whether your interest in the property has reverted from the trustee affects what may be possible. |
| Loan-to-value and equity | More equity can widen the choice of lenders when trading history and bankruptcy are both under review. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- The bankruptcy date and discharge date
- SA302s or accounts for the years before, during and after bankruptcy
- Confirmation from your trustee regarding business assets, if relevant
- Details of any income payments arrangement or order
- Confirmation of your current business structure
- Recent business and personal bank statements
Frequently asked questions
Can I keep trading as a sole trader if I am made bankrupt?
Generally, yes, though your trustee has an interest in your financial affairs and some business assets can form part of the bankruptcy estate. Tools genuinely needed for your trade are often treated differently, subject to your trustee’s agreement.
Can I still be a company director if I am bankrupt?
Generally not without the court’s permission while the bankruptcy is undischarged. This is separate from a bankruptcy restrictions order. Speak to an insolvency practitioner or solicitor about your specific situation if this applies to you.
How long after discharge before I can remortgage as self-employed?
There is no fixed period, but most lenders will want to see a period of settled trading since discharge, ideally with at least one set of accounts covering that time, alongside the usual factors like equity and current income.
What happens to my home if I am made bankrupt?
Your interest in the home generally passes to your trustee. If it has not been dealt with within 3 years, it can revert to you. Check your own case with your trustee, since this affects when remortgaging that property becomes possible.