Bankruptcy blog

For bankrupcty in Scotland see Sequestration

There is no single law on bankruptcy in the United Kingdom with there being one system for England and Wales, one for Northern Ireland and one for Scotland.

Bankruptcy Law

There are two main personal insolvency regimes in the UK: one for England and Wales and another for Scotland. In England and Wales the majority of personal insolvencies are “bankruptcies”. The remainder are Individual Voluntary Arrangements or IVAs, which are arrangements between the debtor and his or her creditors for the payment of the debts on different terms: for example by instalments, or over a period of time. These two forms of insolvency have close equivalents in Scotland, where bankruptcies are known as sequestrations and the equivalent of IVAs are Protected Trust Deeds, or PTDs.

In bankruptcy, an indebted individual sees his debts forgiven in return for surrendering his assets (and sometimes a limited proportion of his income). He is allowed however to retain so-called “exempt” assets such as tools-of-trade and basic necessities and the generosity of this exemption level has received much attention in the USA where it varies among states, potentially affecting bankruptcy filing rates.

Bankruptcy is handled by a Trustee in bankruptcy who must be either the Official Receiver (a civil servant) or a licensed insolvency practitioner.

Following the introduction of the Enterprise Act 2002’s bankruptcy provisions in April 2004, an England & Wales bankruptcy will now normally last no longer than 12 months and may be less, if the Official Receiver files in Court a certificate that his investigations are complete. However, in cases where the bankrupt is considered particularly culpable for his or her insolvency, the bankruptcy can last for up to 15 years, although such orders are rare.

Why are bankruptcies soaring?

Some claim that the Enterprise Act threatens massively to increase the number of bankruptcy cases. Indeed, bankruptcies have risen considerably since the change. However they were already on an upward trend, and the rise is mirrored in Scotland, where there has been no legislation change.

A popular alternative explanation for the run-up in UK insolvencies is “destigmatisation” - people, it is said, are becoming less ashamed of going bankrupt. This is hard to prove, but some evidence is provided by figures showing that, increasingly, bankruptcy petitions are filed by debtors themselves, rather than their creditors.

The UK average household debt-to-income ratio has risen substantially in recent years, leading some to attribute the rise in insolvencies to excessive borrowing. However, the ratio of debt repayment costs to income has remained quite low, weakening this claim. Moreover, the rise in borrowing could itself be a reflection of a lower “fear” of bankruptcy - the destigmatisation effect again.

Insolvency figures

• (p) are provisional figures
• Sources: http://www.dtistats.net/sd/insolv200505/table2.htm http://www.dtistats.net/sd/insolv200602/table2.htm

External links

• British household indebtedness and financial stress: a household-level picture [PDF] Quarterly Bulletin, Personal Sector Articles, Winter 2004 (Report for Bank of England)
• Website of the Insolvency Service in the UK
• National Debtline Bankruptcy information document

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• Employment Standards Fact Sheet #21 File Format: PDF/Adobe AcrobatOffice of the Superintendent of Bankruptcy. Edmonton ph. 780/495-2476, fax 780/495-2466. Office of the Superintendent of Bankruptcy. Calgary
• BDO Dunwoody: Major steps in bankruptcy As part of the filing process, the Trustee prepares a report for the Superintendent of Bankruptcy describing your actions during the time of the bankruptcy,
• F.J. Zielski and Associates Inc. - Credit Counsellor, Consumer The Official Receiver is a federal government employee in the Office of the Superintendent of Bankruptcy and an officer of the court with specific duties
• Bankruptcy - How to Contact Us Addresses for the Office of the Superintendent of Bankruptcy (by Province). Nova Scotia. Industry Canada Office of the Superintendent of Bankruptcy
• Supreme Court of Canada - Decisions - R. v. Multiform 6(1) of the Bankruptcy Act, the Superintendent of Bankruptcy asked the R.C.M.P. to investigate allegations of Bankruptcy Act violations in relation to the
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• The Courts of Nova Scotia, Bankruptcy Court Address for the Office of the Superintendent of Bankruptcy in Nova Scotia:. Industry Canada Office of the Superintendent of Bankruptcy Maritime Centre
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• Dana MacRae - Trustees in Bankruptcy and Proposals - Ontario Canada. Your discharge may be delayed by an opposition by a creditor, the trustee or the Superintendent of Bankruptcy on such grounds as an ongoing criminal
• Office of the Commissioner for Federal Judicial Affairs - (Reports) Canada (Superintendent of Bankruptcy). T-1067-02. 2002 FCT 806, Beaudry J. 19/7/02. 9 pp. Motion for order suspending effect of conservatory measure