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THE ENTERPRISE ACT 2002
Changes to the Law Governing Bankruptcy
Since the 1st April 2004 there have been considerable changes to the laws concerning Bankruptcy in England.
Previously, Bankruptcy would typically last for a period of between 2 and 3 years, but now the majority of bankruptcies will be discharged after only 12 months.
The law was changed to give those with genuine cases of financial hardship the opportunity to be free of their indebtedness.
For those who have tried, unsuccessfully, to resolve their financial difficulties, the new laws allow them to petition for their own bankruptcy and start again.
Additional changes also mean that there are harsher restrictions for those who have previously been made bankrupt and those who have been through criminal bankruptcy.
If you have previously been an undischarged bankrupt during the 15 years before the current bankruptcy (unless the previous bankruptcy was annulled) you will be automatically discharged on 1 April 2009.
You may ask the court to discharge you 5 years after the date of the bankruptcy order, but the court can refuse or delay your discharge, or grant it conditionally on terms requiring you to make some payments out of your income. (Income Payments Order).
You can become free from bankruptcy immediately if the court annuls (cancels) the bankruptcy order; this normally happens when your debts (including any fees and expenses of the bankruptcy proceedings) have been paid in full or if the bankruptcy order was made in error. Alternatively, if you failed to carry out your responsibilities under the bankruptcy proceedings, the Official Receiver could apply to the court to delay your discharge from bankruptcy. If the court is in agreement, your bankruptcy can only end when the suspension has been lifted and the time remaining on your bankruptcy period has run out.
How Assets are Treated
There is now a limit of 3 years, during which the Official Receiver must deal with all of the debtor’s assets, including the bankrupt’s interests in any properties. If the Official Receiver fails to realize the assets during this time, they will be exempt from the estate in bankruptcy.
Where it is believed that the debtor has brought about the bankruptcy through their own irresponsible or imprudent conduct, there are now more severe consequences.
If this is the case, the Official Receiver can apply for a Bankruptcy Restriction Order, which may be applicable for between 2 and 15 years, in addition to the normal length of discharge.
Examples of such situations:
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Failure to produce or retain records;
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Incurring debts as a result of gambling;
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Incurring debts that have arisen as a result of precarious or risky conjecture.
Please note: The cost of petitioning for your own bankruptcy has risen from £390 to £460 since 1st January 2005
Bankruptcy is often considered a “last resort” option, but there are other alternatives that can avoid the severe consequences of bankruptcy:
See Debt Management, IVA’s (Individual Voluntary Arrangement) , Loan options and Mortgages
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