The Enterprise Act 2002
Changes to current bankruptcy legislation
The main provisions of the Enterprise Act 2002 relating to personal insolvency will come into force together with the relevant rules on 1 April 2004.
The principal provisions include:
Reduction of the discharge period to a maximum of 12 months
Previously in a simple case the debtor would be automatically discharged after 3 years or 2 years in the case of a summary administration.
In simple cases now where the debtor has not previously been bankrupt they will be discharged in a maximum of 12 months
For those debtors who are currently undischarged bankrupts or who enter into bankruptcy between now and 12 April 2004 will be discharged either on 12 April 2005 i.e. after the Enterprise Act 2002 comes into force or when he would have been discharged under the Insolvency Act 1986 if this is earlier.
Income payments orders
Although the discharge period will be reduced, the maximum duration of an IPO will not be reduced i.e. an IPO may remain in place for 3 years.
Introduction of the bankruptcy restrictions order
The court will be able, on the application of the Secretary of State, to make a bankruptcy restrictions order against a bankrupt, if the court thinks appropriate, “having regard to the conduct of the bankrupt”.
A bankrupt restrictions order will operate for a minimum of 2 years and the maximum of 15 years from the date of the bankrupt restrictions order.
Its effect will be to prohibit the bankrupt from:
- Acting as a director of a company directly or indirectly taking part in or being concerned with the promotion, formation or management of a company without leave of court
- Obtaining credit of more than £500 without disclosing that he is subject to a bankrupt restrictions order
- Trading in the name other than that in which he was bankrupt without disclosing that name
Breach of a bankrupt restrictions order will be a criminal offence punishable by fine and/or imprisonment.
Examples of conduct included in the schedule are:
- Failing to keep records which account for a loss incurred since 2 years before the bankruptcy petition was presented
- Entering into a transaction at an undervalue
- Giving a preference
- Trading when the bankrupt knew, or ought to have known, that he was unable to pay his debts
- Incurring a debt without a reasonable expectation of being able to pay it
- Failing to account satisfactorily for a loss or deficiency of assets
- Gambling, rash and hazardous speculation, or unreasonable extravagance, materially contributing to or increasing the extent of the bankruptcy, or occurring between presentation of the petition and the bankruptcy order
- Neglect of business affairs materially contributing to or increasing the extent of the bankruptcy
- Fraud or fraudulent breach of trust
Time Limits for commencing realisation of the bankrupt’s interest in home
The trustee must:
- Realise the bankrupt’s interest or
- Apply for an order for sale or
- Apply for an order for possession or
- Apply for a charge on the bankrupt’s home
within 3 years of the date of the bankruptcy or within 3 years from the date that the bankrupt advised the trustee of the asset if this is more than 3 months from the date of the bankruptcy.
If the trustee does not do the above the debtor’s interest in their home will revert to the bankrupt.
Protection for low value interest in the bankrupt’s home
A threshold will be fixed for the value of the bankrupt’s interest in their home, which will be required to dismiss the Trustee’s application for an order for sale or for possession of the property or for an order. As yet, no level has been fixed but it is understood that the figure will be fixed at between £1,000 and £1,500.