Bankruptcy plans labelled 'ridiculous'

The government's proposals to save bankrupts' family homes by giving trustees a three-year limit to sell the property are 'ridiculous and unworkable', personal insolvency specialists have said.

In a committee meeting last month, trade minister Melanie Johnson said she aimed to amend the Enterprise Bill to include a provision limiting trustees in bankruptcy to just three years to sell a bankrupt's property.

She added current practice was 'not entirely' consistent with the principle of giving bankrupts 'a fresh start'.

The proposal is seen as an attempt to counter a trend by some trustees to hold on to the family home until the value of the property increases.

But specialists claim the amendment fails to recognise the difficulties trustees have in realising the family home when the debtor refuses to co-operate.

Louise Brittain, who has recently dealt with the sale of the homes of former MP Neil Hamilton and controversial historian David Irving, said: 'What happens where the bankrupts resist the applications for possession and sale and it goes over three years? What happens where they don't disclose property to use and we find out after the three years?'

Brittain said the implication of Johnson's proposals was that bankrupts would benefit from appreciation in property values and not creditors.

R3 spokesman and personal bankruptcy specialist Peter Sargent said: 'The original proposal is absolutely ridiculous. There needs to be some proper mechanism to protect the debtor and the trustee who is acting for creditors.'

He added there is a danger bankrupts suffering from 'ostrich syndrome' would try to keep the family home by ignoring the problem. He proposed allowing the bankrupt to put forward an alternative proposal if his trustee is delaying the realisation of the home or freezing the value of the property at the original price it was when the bankruptcy order was made.