As part of the Enterprise Act, the DTI said the laws would ‘encourage enterprise while cracking down on irresponsible and reckless creditors’.
The laws aims to distinguish between ‘innocent’ and ‘culpable’ bankrupts, helping to reduce the stigma that surrounds the process.
Bankrupts who have not acted dishonestly or recklessly can be discharged and be up on their feet within 12 months, but those who have been reckless, face the prospect of credit and company management restrictions of up to 15 years.
Many individuals, however, are expected to declare themselves bankrupt regardless, taking advantage of the easier and quicker process.
Mike Gerrard, a personal insolvency specialist at Grant Thornton, warned: ‘The new measures could prove too tempting for too many individuals who, ignoring the very serious consequences, may mistakenly see bankruptcy as a relatively painless get-out clause.’
‘Whilst the Act will probably be successful in achieving its aim to get what is a small number of entrepreneurs back on their feet more quickly and with much less stigma, it could encourage many others to file for bankruptcy thinking there is an easy exit for them’
The new legislation will:
- provide for the automatic discharge of most bankrupts after a maximum of 12 months;
- introduce Bankruptcy Restriction Orders (BROs) to protect the public and business community from bankrupts whose conduct is reckless, culpable or irresponsible;
- introduce Income Payments Agreements (IPA) – a new way of repaying debts to creditors from the bankrupt’s income;
- introduce fast track voluntary arrangements, enabling the bankruptcy order to be annulled in return for increased or speedier returns for creditors;
- remove unnecessary restrictions on bankrupts; and
- limit to three years the period in which a trustee may deal with a bankrupt’s home.
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