Length of bankruptcy

As of 1 April 2004 anybody subject to a bankruptcy order will receive an automatic discharge 12 months after the date of the bankruptcy order. there are 2 exceptions to this rule:

1. If the Official Receiver has concluded his administration and there are no matters for concern in the bankruptcy then, on the Official Receiver reporting that fact to the Court, the bankrupt will receive an early discharge.

2. If a bankrupt fails to comply with the proceedings the Court may suspend the discharge, in other words, stop the clock running. If a bankrupt subsequently deals with his bankruptcy the Court may then set the clock running again but the Court may make a Bankruptcy Restrictions Order (see below).

Bankruptcy 'Disabilities'/Offences

A bankrupt may not:

1. Obtain credit in excess of £500 without disclosing his bankruptcy status.

2. Carry on business in a different name.

3. Act as a director/be involved in the management of a limited company without the leave of the Court.

4. Hold certain public offices.

Bankruptcy Restrictions Order

This is something new in the legislation from 1 April 2004 and is similar to a disqualification order against a director of a failed limited company.

A bankruptcy Restrictions Order would make a person subject to the disabilities mentioned above for a fixed period anywhere between 2 and 15 years.

The sort of behaviour that may warrant a Bankruptcy Restrictions Order include:

• Failing to keep or produce records that would explain a loss of money or property.
• Giving away assets or selling them at less than their value.
• Deliberately paying off some creditors in preference to others.
• Failing to supply goods or services that have been paid for.
• Carrying on a business knowing that debts could not be paid.
• Incurring debts without a reasonable chance of repayment.
• Gambling or making rash speculations or being unreasonably extravagant.
• Causing debts to increase by neglecting business affairs.
• Fraud or fraudulent breach of trust.
• Not co-operating with the Official Receiver or trustee.
• Being bankrupt twice within a 6-year period.

And finally bank accounts, there is nothing in the insolvency legislation that states that a bankrupt may not have a bank account. Generally speaking, a bank will freeze an account on the making of a bankruptcy order but it is quite possible to open a new bank account, this all depends on the bank's own internal policies.