The government has published Bankruptcy — A Fresh Start on its proposals to reform bankruptcy law.
The broad principle is to distinguish bankrupts between those who fail because of commercial risk and those because of irresponsible behaviour. The former are to be treated more leniently and the latter more harshly.
The main changes are:
- to allow discharge from bankruptcy after six months (rather than three years) for those whose failure was honest;
- relaxing the rules on exempting personal property for those who invest capital in a business;
- increasing disqualification for dishonest bankruptcies from three to up to 15 years;
- introducing financial counselling for bankrupts when appropriate.
The proposals were based on a survey of 1412 cases where it was possible to identify the main cause of failure. The survey found that:
- less than 2% were attributable to fraud;
- half of businesses had traded for less than four years;
- 32% failed within the first two years;
- 33% of the directors involved were aged between 35 and 45.
It remains to be seen whether these changes will make it harder for new businesses to obtain credit.
[2000]