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Enterprise Act 2002 - Why change the legislation?
What are the key points of the new legislation?
Is there any change to assets?
What is a Bankruptcy Restriction Order, BRO?
What is an Income Payment Agreement, IPA?
What is an Income Payment Order, IPO?
What are my restrictions as a bankrupt?
Basic procedure
How much will it cost?
Under the old rules the bankrupt would have been discharged after 2 years if unsecured debts were below £20,000, and 3 years if over 'that amount'. The restrictions placed on the individual included making it a criminal offence for an undischarged bankrupt to;
- Obtain credit of £250 or more, either alone or with another person; this also covers obtaining credit by a statement or conduct.
- Managing a Limited company directly or indirectly, or acting as a company director without the leave of the Court.
- Many professionals believed that the old legislation was too draconian and did not reflect on today’s society and needs. For example an individual that has been made redundant from his/her occupation and is unable to secure full time employment thereby preventing him/her for servicing their unsecured debts are, in effect, treated exactly the same as an individual that has been culpable and reckless in their borrowing and who had set out with no intention of ever paying his/her creditors.
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Under the Enterprise Act 2002, those made bankrupt after April 2004, will generally be discharged after 1 year, less in some circumstances for example where the bankrupt has cooperated with the Official Receiver, “OR”, and or Trustee and matters relating to the bankrupt’s conduct and affairs has not been raised by creditors. The OR can file a notice at Court detailing that the investigation of the bankrupt’s affairs has been concluded or is unnecessary. In some instances it is proposed that the bankrupt will be discharged upon the date the notice is filed into court and this could be a matter of weeks.
The bankrupt will not be discharged if there is a Court order suspending his or her discharge. This will be made if the bankrupt has not cooperated with the OR or Trustee in bankruptcy, then the term will be extended. Top
The assets will still form part of the bankrupt’s estate and will, subject to certain exceptions already in place, be controlled by the OR or Trustee as necessary. The Act however changes the way the dwelling house is dealt with, briefly:
Trustee in bankruptcy has 3 years from the date of bankruptcy to deal with the bankrupt’s interest in his/her sole or principal dwelling house, the bankrupt’s spouse or former spouse, following which period it will revert back to the bankrupt, in other words it will no longer be a part of the bankrupt’s estate unless the trustee;
- applies for an order of sale or possession.
- applies for a charging order to cover the value of the interest.
- realises the interest.
- reaches an amicable agreement with the bankrupt regarding the interest.
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This is new and imposes restrictions on a bankrupt whose conduct has been negligent or reckless. These will generally apply after the bankrupt has been discharged and can run for between 2 and 15 years. Reckless conduct can be gambling, borrowing money knowing you have no means to repay it back. Top
This is new and imposes 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 or her Trustee for a specified period. This will be enforceable as if it was an IPO made by the Court. An IPA will detail the period for which it is to have effect and that the period can apply after the bankrupt has been discharged. The agreement will not extend more than three years after the date of the IPA. The IPA can be varied in writing. Top
Upon the application from the Trustee in bankruptcy the Court issues an order that the bankrupt makes a payment to the Trustee in contribution towards his or her debts, this order will usually last for 3 years. These orders are generally not contested and can only be varied upon application to the Court by either the Trustee or bankrupt. Top
You will be required to:
- Not take on any further credit of £500 or more without informing the lender that you are bankrupt.
- Stop using your bank account and any credit cards etc immediately. The Official Receiver will guide you as to what type of account you may hold. This is usually a basic account.
- Cooperate with the Official Receiver. You may well be asked to attend his/her office for interviewing, in some instances this can be done over the telephone.
- Notify the OR of any windfall or financial gain during the bankruptcy.
- The OR may also place other restrictions upon you.
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After taking professional advice and you still wish to petition your bankruptcy then you will need to do the following:
- Telephone your local County Court and ask them to send the forms, they will also send out a helpful booklet on how to best complete the document.
- Once complete, photocopy it for your reference, telephone the Court once more to make an appointment to bring the form in, this will be the day you file your petition.
- A member of the Court staff will check over the paperwork and when ready you will go in front of a Circuit Judge. This is usually in a small room and the only persons present will be you and the Judge.
- You may be asked several questions about your finances and then the Judge will decide there and then whether to approve your application. In most case it is approved and you are day one into your bankruptcy.
- The Court will issue allocate a reference number to your case which you will need to note for any future correspondence with creditors.
- Your paperwork will be sent to the Official Receivers office for their reference and they will be in contact to discuss matters further.
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£485 in cash, postal orders, bank, building society or solicitor’s cheque and made payable to H M Paymaster General. Surprisingly the Court does not accept personal cheques or credit card transactions. This fee is broken down as follows: £335 Official Receiver's fee and £150 Court fee. If you can demonstrate that you are on benefits then you may be exempt or pay a reduced fee. You will need to ask the Court for more details on this. Cost updated November 2007. Top
Alternative to bankruptcy - Individual Voluntary Arrangement IVA
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