How Long Does Bankruptcy Last?

The bankruptcy law reforms introduced in 2004 under the Enterprise Act allows bankrupts to be discharged after one year in the UK instead of three, as was the case earlier. This new reform in the bankruptcy laws in UK has given rise to an environment in which people do not hesitate from taking debts in-spite of knowing the difficulties in repaying it, thereby, inflating the losses of banks and other lenders and creating a serious dent in the economy of the country.

The two rules of bankruptcy in UK:

• Reforms of the Enterprise Act made in 2004 allows bankrupts to be discharged after just one year.
• Restrictions faced by bankrupts, such as denial of credit of more than 250 pounds and freedom to become a company director, are also cleared after 12 months.

The thinking behind the UK bankruptcy laws is that people who have got into serious debt, through no fault of their own find a way of paying off their debts by selling off their assets within a designated time frame and relieving themselves from the stress and strain of financial hardships, the effects of which can have serious repercussion on an individual.

Bankruptcy laws in UK are primarily governed by the Enterprise Law of 2002. But in 2004 the most notable change was made in this act which had a tremendous impact on bankruptcy laws surrounding individuals and small business , making it much easier for people in serious debt to find a way out of their financial situation. The flip side of this amendment has left it's effect on the UK economy, as now a record number of people are filing for bankruptcy and the numbers seem to go up with each succeeding year.

The most significant change in the Enterprise Act that has made bankruptcy the number one debt help choice for people in serious debt, is the duration. Until the Enterprise Act of 2004 the duration for bankruptcy lasted for three years before being discharged. Now the time limit has been reduced to only one year and as the stigma attached to bankruptcy is no longer prevalent in today's society, bankruptcy in UK is seen by many as a easy way out of financial debts. Because of the less time duration now attached to bankruptcy, it seems to be a more attractive solution as compared to the much publicized IVA which has a duration of sixty months. Creditors and banks however feel the crunch of this new reform as bankruptcy is not the best option for them. But if an individual files for bankruptcy, the creditor gets only a small portion of the original debt and the rest is wiped clean. This is the core reason why in UK today the creditors never try to book an individual for bankruptcy even though they lapse in making regular payments.

The final stage, of bankruptcy is the bankruptcy discharge formalities which according to the law takes place at the end of 12 months. With this discharge, all debts and restrictions attached are eliminated. Also the assets acquired after the discharge of bankruptcy remains with the discharged bankrupt. It is time for the UK government to realize that the new Enterprise Law is actually causing a turmoil in their economy and once again serious changes need to be undertaken to reform the existing laws.

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