THE ENTERPRISE ACT 2002
Nelson Says: "Bankruptcy can relieve debt situations"
16 March 2004 Enterprise Act Reforms
On 1 April 2004 the provisions of the Enterprise Act 2002 relating to personal insolvency come into force. The business world is bracing itself for a significant increase in the numbers of people willing to declare themselves bankrupt, particularly in the area of consumer credit, given the possibility of the bankruptcy restrictions lasting for less than a year. What will it mean to go bankrupt under the new regime?
A number of the restrictions on the activities of a bankrupt continue, including the following:
A bankrupt cannot act as a director of a company or indirectly take part in or be concerned in the promotion, formation or management of a company without the permission of the Court.
A bankrupt cannot obtain credit in the sum of more than £250 without disclosing that they are an undischarged bankrupt.
A bankrupt may not engage in any business under a name other than the one in which they were made bankrupt without disclosing that name.
A bankrupt commits an offence if they leave or attempt to leave England and Wales with property of a value of more than £500.
Any property a bankrupt acquires may be claimed by the trustee in bankruptcy for the benefit of the bankrupt's creditors.
The bankrupt may be made subject to an income payments order.
Relaxation of existing rules:-
Bankruptcy Restriction Orders and Undertakings:
An application for a BRO will usually have to be made within one year of the bankruptcy order
The BRO/BRU can last for a period of two to fifteen years. During the operation of the BRO/BRU the prohibitions identified overleaf applying to undischarged bankrupts will continue to apply.
There are several areas of conduct which will be considered in assessing whether a BRO should be made and its duration, such as incurring debts without a reasonable prospect of repaying them, failing to co-operate with the Official Receiver or the trustee in bankruptcy, evidence of fraud etc.
It will no longer be an offence to fail to keep proper accounts for a business nor to gamble or engage in "rash and hazardous speculation". However, behaviour of this type will be taken into consideration in the context of considering whether a BRO/BRU is appropriate.
Amendments to bankruptcy procedures:
A new fast track procedure for Individual Voluntary Arrangements for un-discharged bankrupts is introduced.
It will be interesting to see how strictly the provisions regarding incurring debts without a reasonable prospect of repaying them are interpreted, resulting in the imposition of Bankruptcy Restriction Orders.
What is clear, is that provided you have no substantial assets which could be absorbed by the official receiver or any appointed trustee, declaring yourself bankrupt is now a more positive step to a financial recovery.
Insolvency Act 2000
2000 Chapter 39
ARRANGEMENT OF SECTIONS