Bankrupts due to benefit from early discharge

Bankrupts due to benefit from early discharge

The act cut the traditional minimum length of bankruptcy from three years to one. But rather than enforce the full three years for those made bankrupt before April 1 2004, the new law will see them discharged tomorrow.

Steve Treharne, head of personal insolvency at financial services firm KPMG, said: "One of the transitional measures introduced by the act means that most people made bankrupt before it was introduced, who would typically have stayed bankrupt for three years, will be cleared of bankruptcy after just one year of the act being in place.

"We have estimated that about 42,000 people will be discharged from bankruptcy this Friday."

Advertisement starts

Advertisement ends

Mr Treharne also pointed to a loophole in the new law which had resulted in fraudulent bankrupts escaping punishment due to human rights legislation.

"This was an unintended consequence of the new legislation," he said. "The government introduced Bankruptcy Restrictions Orders and Undertakings (BROs) to deal with dishonest and fraudulent bankrupts.

"But human rights legislation means that dishonest dealings that took place before April 1 2004 and contributed toward the bankruptcy cannot be taken into account. Potentially, this means that thousands of bankrupts have got off scot-free in the last year."

Mr Treharne said that just 12 BROs - "a tiny percentage of the thousands expected on an annual basis" had been made to date. He added that he expected to see the figure increase dramatically in the future.

A survey carried out by YouGov for KPMG found that 56% of respondents thought there was still a social stigma associated with bankruptcy, while 32% thought bankrupts should have to wait 10 years or more before being allowed to run a company or business again, and 14% believed they should be banned for life from running a business.