|
Bankruptcy
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 will
change. 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 to petition for your own bankruptcy is now £460 – this consists of £310 as a bankruptcy deposit which is always payable and a £150 court fee,
which can be remitted for those on benefits or low incomes.
Bankruptcy - The process
If a creditor wishes to make you bankrupt they must prove
that you are unable to pay your debt 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 debt 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.
Don't wait until it's too late
|
