New Law Makes Bankruptcy Less Taboo

The new bankruptcy law introduced by the Enterprise Act 2002 was introduced on 1st April 2004. The objective of this change is to help remove the taboo of bankruptcy from genuine cases and further penalise delinquent bankrupts.

The Government comments that “most creditors would run a mile from an individual who had been bankrupt in the past”. The new law will therefore make it easier for the “honest” bankrupt and will give them a chance to rebuild their business and run it successfully after being discharged. Once the bankrupt has been discharged, creditors will no longer be aware of the bankruptcy and will not “run that mile” when the individual seeks credit.

What is the new law?
The standard period of bankruptcy has been reduced from 3 years to 12 months. Those already bankrupt after 1 April 2004 might also have their bankruptcy period reduced.

If a bankrupt’s discharge date currently falls after 1st April 2005, they will be discharged on this date. In the meantime, if the discharge date is before 1st April 2005, it will remain the same.

Importantly, the above law will not apply to bankrupts who have previously been bankrupt, who will need to apply to the Court to be discharged five years after their most recent bankruptcy order.

The automatic restrictions imposed on ALL bankrupts are also to be removed. However, these restrictions can be imposed on delinquent bankrupts under a Bankruptcy Administration Order.

Once discharged from bankruptcy, a fresh start is encouraged with the aid of creditors who may offer more flexible credit terms.

CCJs will remain registered for six years, even if the debt has been paid off in full within this period. (Although, if the debt is paid off a note is added to the record).

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