What is the Enterprise Act?
The Enterprise Act 2002 came into force on the 1 April 2004.
Its arrival changed, considerably, the insolvency laws of England, Wales and Northern Ireland.
Changes To Bankruptcy
Prior to the Enterprise Act 2002, bankruptcies in England, Wales and Northern Ireland has a duration of up to 3 years. It was only after this time period that discharge could be expected.
But, since the introduction of the new Act, the majority of bankruptcies now automatically discharge after 12 months.
Quicker process for the majority
The introduction of the Enterprise Act has reduced the severity of bankruptcy for the majority of indebted individuals, who find themselves bankrupt through no other reason than personal hardship.
For these people, bankruptcy will be must quicker and less traumatic.
Tougher restrictions for irresponsibility
In contrast, there are now stiffer restrictions to be imposed against those who become bankrupt as a result of imprudence, and those individuals who have previously been made bankrupt.
As of the introduction of the new Act, maximum bankruptcy restrictions through a Bankruptcy Restriction Order of between 2 and 15 years can be imposed if it is considered that the bankruptcy was brought about by imprudent conduct or irresponsibility, such as gambling or reckless spending.
Removed preferential status of debts to the Crown
Prior to the introduction of the Act, any debts owed to the Crown, such as unpaid taxes, would benefit from a preferential status.
Those debts would need to be give priority over other unsecured creditors in the event of an insolvency procedure.
Now, the act has demoted the Crown debts to the same status as all other unsecured creditors.
This is of particular interest for those hoping to enter into an IVA, as previously HMRC debts were regularly given a preference, but that is no longer the case
New time limits for the Official Receiver
The Enterprise Act also imposed a responsibility on the Official Receiver to deal with all the bankrupt's assets, including any interest in properties, within 3 years of the bankruptcy order being made.
Failure to do so will result in any assets being made exempt from the bankrupt's estate.
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