Recent changes in UK Bankruptcy Laws

In the UK bankruptcy law, several changes were brought in by the Enterprise Act 2002. This Act came into force on April 1st, 2004 but it may also affect people who were declared bankrupt before this date.

This newly introduced law brought several changes in the insolvency law in the UK. These changes will affect a bankrupt person in several manners.

1. Discharge from bankruptcy
This new Act may prove helpful in reducing the period of your bankruptcy.

(a) In case of automatic discharge from bankruptcy
According to the bankruptcy law in UK that used to exist before this Act, a first-time bankrupt was eligible for automatic discharge after either 2 or 3 years of declared bankrupt. In most of the cases, the automatic discharge period is of 3 years. Your discharge period can be reduced to 2 years, if you yourself had filed for your bankruptcy and your total unsecured liabilities were less than £20,000. In such a case, the court might issue an order reducing the discharge period to 2 years.

Following the new amendments in the bankruptcy law, the automatic discharge period, for people who are declared bankrupt on or after 1 April 2004, will be one year only. If you have been declared bankrupt for the first time and you haven’t discharged automatically by 1 April 2004, as per the new Enterprise Act, you are entitled for a discharge before 1 April 2005.

(b) Previous bankruptcy
If you have been declared bankrupt at anytime in the last 15 years prior to your current bankruptcy, the discharge period must be before completion of the period of 5 years from April 1st, 2004. It means the person must be discharged before 1 April 2009. After completion of the period of 5 years, one needed to apply to the Court to get a discharge order.

(c) Suspension of automatic discharge
In many cases, the court may suspend your automatic discharge. If you fail to cooperate with your Official Receiver appointed by the court, then the court might suspend your discharge. There could be several other reasons as well for suspension of your discharge order. In all these circumstances, you need to contact the Court requesting to lift the suspension order and grant you the discharge.

(d) Criminal bankruptcy order
If a criminal bankruptcy order has been passed against you, an automatic discharge will not be available to you. In such cases, you will have to go to the court and apply for your discharge. To know how to obtain your discharge in case of a criminal bankruptcy, you may contact your Official Receiver.
2. Your assets
Under the prevailing bankruptcy law, prior to the implementation of the Enterprise Act, your assets and financial properties might be sold and the amount realised thereof would be distributed among the creditors. The moment you are declared bankrupt, the control on your property would automatically be transferred to the Official Receiver or the trustee appointed by the court. The trustee then used to realise any value of your property and distribute the benefit among your creditors. The Official Receiver or the trustee can sell your property any time during your bankruptcy period and this does not affect your date of discharge.

After the Enterprise Act is enacted, Official Receiver or the trustee would take maximum 3 years from the date of 1 April 2004 to deal in your property matters and can reach to one of the following settlements:
The Official Receiver or the trustee can sell your property.
The Official Receiver or the trustee may apply to get an order for sale from the court.
The Official Receiver or the trustee may apply to get a possession order or may apply for a charging authority on your property.
The Official Receiver or the trustee may seek a formal agreement with you and may establish that a specific property is not a part of your bankruptcy estate.

There are some exceptions also, however. For example, if the Official Receiver or the trustee is not aware of your interest in the said property prior to 1 April 2004, he or she might have to deal with the property earlier than 1 April 2007, provided you must have notified him or her before 1 July 2004. But in case, you have informed the Official Receiver or the trustee before 1 July 2004, then within three years of awareness of your interest in the said property, he or she would have dealt with it.

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