MONEY COMMENT
Bankruptcy Made Easier

By Jane Mack (TMFJane)
April 2, 2004

A new law that will lead to dramatic changes in the way bankrupts are treated came into force this week.

From now on, most bankrupts will be automatically discharged after just one year instead of two to three years and, in some cases, discharge could come even earlier.

Although people going bankrupt will still risk losing their home, trustees acting on behalf of creditors will have just three years to reach an agreement on the sale. Up to now, trustees have had the power to force a sale even many years after bankruptcy. However, bankrupts will still face severe restrictions on their finances, making it difficult for them to get a mortgage or future credit - and they'll face prosecution if they're found to be dishonest.

In most cases, bankrupts will have to make payments to creditors from their income for three years and Bankruptcy Restriction Orders will be imposed on those considered to have been dishonest, reckless or blameworthy. The orders can last for up to fifteen years and will prevent people from getting credit of more than £500 without disclosing their status as an undischarged bankrupt, acting as a director of a company, and trading under different names. Breaching an Order will be a criminal offence.

Last year, the number of people going bankrupt rose by nearly 30% and some fear that the new law will make it too easy for people to go down this route. But the Insolvency Service believes the new regulations will simply enable it to handle bankruptcies more effectively.

More: Get Out Of Debt.