The effect of bankruptcy on a business
The effect on employees
If a sole trader or partnership goes bankrupt, the Official Assignee will decide how the business will be dealt with including the sale of any assets the business owns.
If the business is not going to continue to be traded, your employment will be terminated. You can file a claim for any salary, wages, holiday pay and/or redundancy you are owed against the bankruptcy. You will need to provide evidence of the amount you are owed.
The Official Assignee will try to recover the bankrupt person’s business records including the wage books - so you should contact them to help collect your evidence.
Your claim may be considered preferential, which means you will be paid out before the unsecured creditors if there are funds available. However, payments may take some time.
Emergency financial assistance may be available from Work and Income New Zealand (WINZ), your local City Mission or the food bank. WINZ can also provide food vouchers to help with your immediate needs.
The effect on creditors
Unsecured creditors can’t take legal action against a bankrupt person unless they have permission from the Court or the Liquidator.
Secured creditors can deal with the bankrupt person’s secured assets. They can claim as an unsecured creditor for any shortfall.
If there is any surplus after the assets have been valued or sold, it will be paid to the liquidator.
The Official Assignee will send a report out to all creditors within 25 working days outlining the bankrupt’s financial position. Creditors can log in to the Insolvency and Trustee Service website to get regular updates on the progress of the bankruptcy at any time after the first report has been filed. A final report will be sent when the administration of the estate is closed.