New legislation
- the Enterprise Act 2002
The changes to bankruptcy discharge are expected
to come into force early in the 2004 financial
year.
Summary
The main
changes are as follows:-
-
In
certain circumstances you may be discharged
from bankruptcy after one year (previously
the minimum was two year’s)
-
A limit
of three years may be placed on the Trustee’s
rights to realise equity in your home.
(previously this was open ended).
-
Harsher
penalties imposed on those who are considered
to have brought about their bankruptcy
through reckless or irresponsible behaviour.
Restrictions after bankruptcy could last
for a further two to fifteen years.
Changes
to the bankruptcy discharge period.
Those who
are made bankrupt after that date will generally
receive their discharge one year after the
date of the bankruptcy order.
However, a bankrupt will not be discharged
if there is a Court order suspending his or
her discharge. Those orders are generally
made where the bankrupt has not co-operated
with the Official Receiver or Trustee in bankruptcy.
There is the possibility that in some cases
the bankruptcy discharge period will be less
than one year. This will only occur where
a bankrupt has fully co-operated with the
Official Receiver and/or Trustee, where creditors
have not raised any matters relating to the
bankrupts conduct and affairs which require
further investigation and where the Official
Receiver has filed a notice at the Court stating
that the investigation of the bankrupt’s
affairs has been concluded or s/he thinks
it unnecessary.
Does
the Enterprise Act affect what happens to
my assets?
No. Your
assets will still form part of the bankruptcy
estate, and, subject to certain exceptions
already in place, the Trustee will have control
of them and sell them to help pay off your
debts. The Act makes a slight change in relation
to your home. (see below).
What
are Bankruptcy Restrictions Orders (BROs)?
BROs are
a new civil regime to protect the public from
those bankrupt’s whose conduct has been
irresponsible or reckless. A BRO generally
imposes restrictions that apply after a bankrupt
has been discharged. Those restrictions apply
for a period of between 2 and 15 years.
What
is the effect of the change in the discharge
period if I am already bankrupt before these
new measures come into force?
If you are
due to be discharged less than one year after
the provisions come into force there will
be no change to the date of your discharge
(unless the Court has made an order to suspend
the discharge period).
If your discharge date is more than one year
after the provisions come into force then
that period will be reduced and you will be
discharged one year after the provisions come
into force (unless the Court has made an order
to suspend the discharge period). Other Rules
apply to second-time bankrupts (see below).
What
happens to the discharge period if I have
been bankrupt more than once?
The position
is different for those individuals who have
been an undischarged bankrupt more than once
in the previous fifteen years and who are
still undischarged at the time the individual
insolvency provisions come into force. In
this case, if the Court has previously granted
a discharge that will continue to determine
that date of discharge, if no such order has
been made the bankrupt will be discharged
five years from the date of commencement.
Those persons made bankrupt through a criminal
bankruptcy can only be discharged by order
of the Court.
What
changes are being made regarding a bankrupt’s
home?
The Act provides
a limit of three years on the period during
which the Trustee in bankruptcy can deal with
a bankrupt's interest in a dwelling house
which is the sole or principle dwelling house
of the bankrupt, the bankrupt's spouse or
a former spouse, following which period it
will revert back to the bankrupt (i.e. it
will no longer form part of the bankruptcy
estate) unless the Trustee:
(a) realises
the interest;
(b) applies for an order of sale or possession
in respect of the premises in which the
interest subsists;
(c) applies for a charging order over the
premises in respect of the value of the
interest; or
(d) enters into an agreement with the bankrupt
regarding the interest.
What
are ‘fast track’ Official Receiver
IVAs?
Individual
Voluntary Arrangements are an alternative
to bankruptcy, without the same automatic
restrictions, where the debtor comes to an
arrangement with his or her creditors about
the repayment of his or her debts. The Enterprise
Act introduces a new fast-track regime for
post-bankruptcy Individual Voluntary Arrangements
where the Official Receiver is the proposed
nominee. Under this regime, the proposal will
be agreed with the Official Receiver and filed
with the Court. No meeting of the creditors
will be called and it will not be possible
to modify the proposal. The Official Receiver
will send out the proposal to the creditors
on a 'take it or leave it' basis and the creditors
will either agree to or disagree with the
proposal by correspondence. If the Individual
Voluntary Arrangement is approved, the Official
Receiver becomes supervisor and will notify
the Court, which can then annul the bankruptcy
order.
What
is happening with Income Payments Orders (IPO)
and Income Payments Agreements (IPA)?
The current
IPO regime is designed to ensure bankrupts
make an affordable contribution towards their
debt, generally they last for just under three
years, and in most cases they cease on discharge
from bankruptcy. The Enterprise Act sets out
that generally IPOs will in future last for
three years from the date of the IPO.
IPOs are made by the Courts on the application
of the Trustee in bankruptcy and generally
they are not contested. IPOs can be varied
on the application to the Court by the Trustee
or the bankrupt. IPAs will provide a legally
binding written agreement between the bankrupt
and the Official Receiver or Trustee that
requires the bankrupt (or a third party) to
make specified payments to his Trustee for
a specified period. This will be enforceable
as if it were an IPO made by the Court. An
IPA must specify the period in which it is
to have effect and that period can apply after
a bankrupt is discharged but cannot extend
to a date more than three years after the
date of the IPA. An IPA may be varied in writing.
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
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