English Bankruptcy Law
Bankruptcy laws are not applied uniformly throughout the U.K., with those applied in England and Wales differing from those in Scotland and Northern Ireland. In England, the legal term "bankruptcy" applies only to individuals. Businesses and corporations are subject to different insolvency laws. The idea behind bankruptcy laws in England is to give "honest" debtors a clean start by relieving them of their debts and allowing them to "repay creditors as far as possible via the sale of existing assets," according to Clear Start.
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Laws
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Bankruptcy in England is governed largely by the Insolvency Act of 1986 but changes were introduced under the Enterprise Act of 2002. The latter Act brought in three major changes, according to the U.K. Insolvency Helpline. Under the new legislation a bankruptcy could be discharged after one year, where previously the minimum was two years. A time limit of three years was imposed on the trustee's power to raise funds by selling the bankrupt's home. Harsher penalties were imposed on people considered to have brought about their bankruptcy through reckless behavior.
Process
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An individual can declare himself bankrupt or a creditor who is owed £750 or more may make a bankruptcy petition against them, according to the U.K. Insolvency Helpline. A court will decide whether to issue a bankruptcy order. If one is issued, a trustee will be appointed to manage the bankruptcy. The trustee is usually an official receiver or court-appointed officer, according to Becoming Bankrupt. They will assess how much the bankrupt can afford to pay and which assets, if any, may be sold to raise funds.
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Disadvantages
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All the bankrupt's assets, including her home, come under the control of the Trustee and may be sold, according to the U.K. Insolvency Helpline. Under English law a bankrupt may not seek to obtain credit of £250 or more without disclosing her bankruptcy, conduct business under another name or be involved in running, forming or promoting a company without the permission of the court. She will not be able to hold certain public offices. Her credit rating will be seriously affected.
Benefits
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Bankruptcy may be the quickest and cheapest way out of debt, according to Bankruptcy Information U.K. Under Section 283(2) of the Insolvency Act you are allowed to keep the tools of your trade, all clothing, bedding, furniture and a car that is not too expensive and meets certain conditions. Bankruptcy may be the best option for someone with no major assets and who lives in rented accommodation or a mortgaged property in negative equity.
Costs
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A person under a bankruptcy order must pay certain costs under English law, according to the U.K. Insolvency Helpline. The court fee is £120, although this may be waived by the judge in certain circumstances. A deposit of £250 towards the costs of administering the bankruptcy must be paid. In the High Court or before a solicitor, there is also a fee of £7 for "swearing the statement of affairs."
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References
Resources
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