What Is a Bankruptcy Restrictions Undertaking (BRU)?

When you enter into bankruptcy, you have to take on a certain set of restrictions. Violating these restrictions can result in either a Bankruptcy Restrictions Order (BRO) or a Bankruptcy Restrictions Undertaking (BRU).

Bankruptcy restricts you from:

Borrowing £500 or more without informing the lender you’re bankrupt
Acting as a company director, or shadow director
Being involved in the creation, management, or promotion of a company
Using a new self-employed trading name without telling people you’re bankrupt

In this guide, we’ll be explaining the process of a BRU, what the effects are, what makes it different from a BRO, and how you can protect yourself.

What Is the Process of a Bankruptcy Restrictions Undertaking?

The Official Receiver Applies to the Court

If the Official Receiver thinks that you’ve broken your bankruptcy restrictions, or that you’ve acted irresponsibly or dishonestly, they’ll apply to court to have you served with a Bankruptcy Restrictions Order.

The Official Receiver will send you a letter to notify you of their intentions, explaining why they’re making the application.

You Respond to the Letter

You’re given 21 days to respond to the Official Receiver’s letter. You can choose to either accept or challenge the allegations.

Accepting the allegations will place you into a Bankruptcy Restrictions Undertaking, whereas challenging them can result in a Bankruptcy Restrictions Order.

BRU Is Made

When you accept the allegations, you’ll sign a letter accepting the terms of a Bankruptcy Restrictions Undertaking. This will also be signed by the Secretary of State.

Once the BRU is signed by both parties, a copy is sent to you and the court. The BRU is then active, legally obligating you to abide by its restrictions.

What Are the Effects of a Bankruptcy Restrictions Undertaking?

A Bankruptcy Restrictions Undertaking – like a Bankruptcy Restrictions Order – will extend the period you have to abide by the restrictions of bankruptcy. Bankruptcy restrictions normally last for 12 months but a BRU, depending on the severity, can extend restrictions from anywhere between 2-15 years.

Both BRUs and BROs place additional restrictions on you:

You can’t work on education committees
You’re unable to work on healthcare committees
You can’t work in public office
You cannot be the trustee of a pension scheme or charity

These additional restrictions prevent you from working in positions of social responsibility. This is done in an attempt to protect the public.

What Is the Difference Between a BRU and a BRO?

BRUs and BROs are both court orders with the same effects and the same grounds. However, you get a BRU when you accept the allegations made against you, and a BRO when you refute them.

A BRU saves on expensive court proceedings as the order is accepted through writing. As a result, BRUs are often less severe than BROs.

If you think the allegations against you are true or you don’t have good evidence to defend yourself, accepting a BRU is a wise decision.

What Actions Can Result in a Bankruptcy Restrictions Undertaking?

Aside from breaking bankruptcy restrictions, there are several actions that may serve as grounds for a Bankruptcy Restrictions Undertaking:

Borrowing money that you know you can’t repay
Failing to cooperate with the Official Receiver
Negligently allowing your debts to increase
Hiding assets or selling them below market value
Making preferential payments to creditors (usually to one you have a personal guarantee with)
Becoming bankrupt many times

Any action that could be considered irresponsible or dishonest can serve as the grounds for a BRU. You should make sure that you’re upfront and honest with the Official Receiver and anyone you do business with.

What Happens if I Break the Restrictions of a BRU?

Violating the restrictions of a Bankruptcy Restrictions Undertaking is a bad idea. Breaking the restrictions of bankruptcy isn’t a crime; however, breaking the restrictions of a BRU is. As a court order, you’re legally obligated to abide by it.

When you violate a BRU, you commit a bankruptcy offence. This can have several consequences:

You can have your bankruptcy restriction period extended again
You may be issued with large fines
You could potentially be imprisoned

How Can I Protect Myself?

If you’re worried about bankruptcy restrictions, you should get in touch with an insolvency practitioner as soon as possible.

Our expert team can help to ensure you’re protected legally. You may find that you’re better suited to an alternative debt solution such as an IVA, allowing you to deal with your debt whilst avoiding the restrictions presented by bankruptcy.

Get in touch to book a free consultation today.