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Bankruptcy
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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.
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 £450 from 1st April
2004.
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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.
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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.
- You may not practise 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.
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For more information on Bankruptcyt,
please contact us on 0800 074 6918 or email us at: info@insolvencyhelpline.co.uk. | 
