We’re insurance brokers and cannot assist with any advice on bankruptcy. The below article is for general information purposes only.
If you are looking for insurance and currently bankrupt, we are unable to assist in any way. If you have been discharged, me may be able to assist depending on the circumstances surrounding the bankruptcy.
Sometimes things just don’t go as planned when it comes to money.
Often you fight your way through, but sometimes it’s a losing battle and the only way out is bankruptcy.
Before you go down this path, it’s important to consider some of the consequences that this can have on you as a tradie.
We can’t provide you with bankruptcy advice, but we can tell you about how it can affect your ability to run a business and get insured.
Impact on business operations
Once you’ve declared bankruptcy, you can no longer be the director of a company.
This means you won’t be able to run any business as a Pty Ltd company.
There is nothing to stop you from operating as a sole trader, which is how most tradies (especially subcontractors) operate anyway.
The only requirement when operating as a sole trader during your bankruptcy is that you only trade under your own name, or the trading name you used when you first declared bankruptcy.
You may be able to get an exemption if you want to use a different trading name, but only if you let all of your clients known about the bankruptcy.
Insurance impact
Whilst you can still operate as a sole trader during your bankruptcy, you will run into problems when it comes to insurance.
No insurance company (that we know of) will offer business insurance coverage to a tradie whilst they are still bankrupt.
This can be a major issue, since a lot of builders and construction companies require that all subbies on site have their own public liability insurance.
So although you can legally operate as a sole trader, without insurance you may be severely restricted in terms of what work you can take on.
After you’ve been discharged
In most circumstances you’ll be discharged from your bankruptcy after a period of three years, or earlier if you’ve managed to repay all of your debts.
Now you can choose to run your business however you like, either as a company or a sole trader.
You might still have some issues when it comes to insurance though.
All business insurance policies will include a question about bankruptcy, and if you’re operating as a company, the question must be answered by all directors of the company.
When you answer yes to the question, you will find that some insurers are not willing to offer cover for a number of years after you have been discharged.
Thankfully not all insurers are the same, and generally we will be able to find someone to provide you with public liability insurance even if you’ve only recently been discharged.
Are there any ways around it?
If you get really creative there are ways to keep working and remain insured throughout and after your bankruptcy period.
It’s not our place to suggest how this would be done, or even if it’s 100% legitimate.
The best advice may be to simply stick with a job on wages until the issues are behind you.
As a tradie working on wages for someone else, your bankruptcy (either current or discharged) will have no impact on your ability to work.
Insurance won’t be an issue since you’ll be covered by your employer’s insurance, and thankfully your bankruptcy has no impact whatsoever on your employer’s insurance.
More information
For more information on bankruptcy in generally we recommend that you speak with your accountant first.
If you have insurance specific questions then we will be more than happy to assist. You can contact us via the website or call the team on 1800 808 800.
