What are the main changes of the new legislation?

The Enterprise Act 2002 is an United Kingdom Parliament Act which changed the major law governing the UK regulations of Insolvency and Bankruptcy. The legislation also made major changes to the UK competition law in aspect of mergers.

The main aim of the legislation has been to provide a reasonable start for those who have declared bankruptcy out of genuine and unavoidable reasons. The changes have been made to decrease the term of bankruptcy to enable the bankrupt individual to start afresh at the earliest.

When did the Enterprise Act 2002 come into force?
The provisions of the Act regarding corporate insolvency came into force on 15th September 2003 while the individual insolvency and related reforms came into force on 1st April 2004.

What are the changes brought about by the Enterprise Act 2002?
Changes have been made in the legislation with respect to 3 aspects namely the term of bankruptcy, the treatment of assets, cost of petition and treatment based on reason for bankruptcy. These aspects have undergone major changes which is a facilitator to help individuals genuinely in a financial crisis. The law changes also distinguishes fraudulent bankrupt persons and imposes hard and strict restrictions on them.

Term of Bankruptcy
The term of bankruptcy which was initially 2-3 years has been changed to 1 year. Any bankruptcy declared after April 1st 2004 will be discharged within a period of 12 months.
In case you are already in bankruptcy term when the Act came into force, then your previous term end date will decide the current end date. If your previous term was scheduled to end beyond 1st April 2005, then you shall be discharged in about 1 year from 1st April 2004 and if your previous end date is before 1st April 2005, then the order will not undergo any term change and carry on as usual.
In case you are declaring bankruptcy for the second time after 1st April 2004, the your term will be the same 12 months unless until the appointed official receiver decides to postpone your date or recommends for a Bankruptcy Restriction Order.
If an individual has been bankrupt more than once and is still not discharged from the terms of bankruptcy by 1st April 2004, then a court order determines the date of discharge for such cases. In case no such court orders have been made, the individual shall be discharged of bankruptcy charges by 1st April 2009 which is 5 years from the date the law has been enacted. People who have been declared for criminal bankruptcy can only be discharged by means of a court order.

Treatment of Assets
Previously the bankruptcy laws did not define the time limit in which the trustee can claim the principal home of the bankrupt person. The new changes states that there is a 3 years time limit within which the trustee or the official receiver can deal with the principle home of the bankrupt. After 3 years, any interest in a sole home property of the bankrupt or his spouse will revert back to him. This interest of his will no longer continue to be a part of the bankruptcy estate and is not considered as a potential source for repayment of debts. The previous open ended time limit has been changed to a fixed period of 3 years after which the property can no longer be used to write off debts.

Bankruptcy Restrictions Order
The reason behind the bankruptcy decides the treatment given to the bankrupt. As the law aids genuine and reasonable bankrupts, it also contains provisions to impose harsh penalties on individuals whose irresponsible behaviour has been the reason behind their bankruptcy.
Bankruptcy Restriction Order can now be recommended by the appointed official receiver for not maintaining up-to-date records, for availing a debt before declaring bankruptcy in spite of knowing that the individual cannot repay or for reckless behaviour and indulgence in gambling or other actions which has been the reason for increasing the debts or triggering the bankruptcy. These restrictions can now last for a minimum of 2 to a maximum of 15 years.

Cost of Petition
The changes in the Act have also included changes in the petition cost from the previous £ 390 to the current £460.

Where can you find a copy of the Act?
An electronic copy can be found in the Stationary Office website and more details can be obtained by mailing the Insolvency Service website.

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