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The Enterprise Act 2002
– Changes to the Law Governing Bankruptcy.
Bankruptcy – The Process
Bankruptcy – Advantages
& Disadvantages
The Enterprise Act 2002
– Changes to the Law Governing Bankruptcy.
From the 1st April 2004 the law concerning
bankruptcy has changed. The usual term for
bankruptcy was previously 2-3 years. From
1st April 2004 most bankruptcies will be discharged
within 12 months.
The purpose for the changes is so that those
who have been unavoidably made bankrupt for
genuine reasons are given a better chance
to start again.
The position is different for an individual
who has been an undischarged bankrupt more
than once in the previous 15 years and who
was still undischarged at the time the new
law came into force. In this case, if the
court has previously granted a discharge,
that order will continue to determine that
date of discharge. If no such order has been
made the bankrupt will be discharged on 1
April 2009 (5 years on from 1 April 2004),
or by a court order. People made bankrupt
through a criminal bankruptcy can only be
discharged by order of the court.
Individuals who go bankrupt for a second
time after 1.04.04 will be discharged after
one year the same as anyone else unless the
Official Receiver decides to suspend the discharge
date or apply for a Bankruptcy Restriction
Order.
If you are currently bankrupt, and your bankruptcy
term will go beyond 1st April 2005, you should
be discharged one year from 1st April 2004.
If you are currently bankrupt and your bankruptcy
order finishes in less than 1 year from the
1st April 2004, the order will end as normal.
Other significant changes relate to the treatment
of assets. Whereas previously there was no
time limit, The Act sets a limit of 3 years
on the period during which the trustee in
bankruptcy can deal with a bankrupt's interest
in a home which is the sole or principal home
of the bankrupt, the bankrupt's spouse or
a former spouse. After this period it will
revert back to the bankrupt (i.e. it will
no longer form part of the bankruptcy estate).
Harsher penalties will be imposed on those
who are considered to have brought about their
bankruptcy through reckless or irresponsible
behaviour.
Bankruptcy Restriction Orders may be applied
for by the Official Receiver for
- failing to keep or produce records;
- incurring a debt prior to the bankruptcy
that the bankrupt had no reasonable expectation
of being able to repay
- carrying on any gambling or rash or hazardous
speculation or unreasonable extravagance
which may have materially contributed to
or or increased the extent of the bankruptcy
debt.
Restrictions after bankruptcy could last
for a further two to fifteen years.
The cost of a petition to be made bankrupt
has also changed from £390 rising to
£460.
Bankruptcy - The process
If a creditor wishes to make you bankrupt
they must prove that you are unable to pay
your debts or that you have no reasonable
prospect of doing so.
Once the creditor has sent a petition to the
court, a hearing takes place and an order
is made if the court feels that this is the
appropriate outcome.
An Official Receiver is then appointed. The
Receiver will make an application to the court
claiming any income that exceeds the amount
you need to cover essential living costs for
yourself and your family.
The Official Receiver can also claim your
property and any other assets you have. After
a minimum period of one year you will no longer
be liable for the debts included within the
bankruptcy.
Bankruptcy - The Advantages
and Disadvantages
What are the advantages of bankruptcy?
For the person involved, bankruptcy provides
relative peace of mind and possible automatic
discharge after one year.
For the creditors, bankruptcy allows a full
investigation of the debtor's affairs to be
carried out.
What are the disadvantages of bankruptcy?
- You lose control of your assets - this
may include your house and vehicle.
- You cannot obtain credit for more than
£500 without permission from the lender.
- Certain occupations and professions will
not allow you to go bankrupt.
- You cannot act as a company director.
- You cannot take any part in the promotion,
formation or management of a limited company
without the permission of the court.
- You cannot trade in any business under
any other name unless you inform all persons
concerned of the bankruptcy.
- Their may be restrictions on you practicing
as a Chartered Accountant / Lawyer.
- You may not act as a Justice of the Peace
(JP) or school governor.
- You may not become a Member of Parliament.
- You may not become a member of the local
authority.
- Your credit is affected for many years
after the annulment.
- You may be publicly examined in court.
If you are considering bankruptcy and would
like free advice and information on this and
other options you can e-mail
us or call 0800 716239.
Changes
to the Bankruptcy Legislation |
Bankruptcy
FAQ’s
For further advice on
bankruptcy and the alternatives contact:-
Payplan - The Free Debt Advice Agency
Freephone 0800 917 7823
Email: help@payplan.com
Web: www.payplan.com
Citizens Advice Bureaux - www.nacab.org.uk
National Debtline - 0808 808 4000
or read more about other debt
solutions that may be suitable for you:
IVAs - Informal
Arrangements - Debt
Management Plans
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