Currently if a person is made bankrupt then they remain an undischarged bankrupt for a period of three years. There is legislation currently being introduced that would reduce that period of time to one year.
What does undischarged bankrupt mean?
An undischarged bankrupt is a person who has a Trustee appointed over them who controls their assets, debts and various other things.
An undischarged bankrupt has restrictions placed on them such as limitations on travel, borrowing money, entering into contracts (for instance for a new mobile phone) and whether or not they are eligible to be a director of a company. Essentially a bankrupt person is kind of like a child, they have to have someone else enter into any contracts or hold assets or debts in their name as a child cannot hold assets or enter into debt in their own name. It is the same for an undischarged bankrupt.
What would the changes do?
If the legislation is made as it is proposed then a person would be able to apply to be discharged from bankruptcy after a year. This is assuming that the Trustee has finished doing everything that they need to do for the person to be discharged. Essentially this is being done to encourage people to use the bankruptcy system, because they think a year is less daunting than three years.
What should I do?
If you are in financial trouble then you should make an appointment to come and speak with Jacinta Watkins. After nearly a decade working in commercial law and many years working for the banks she understands the law surrounding financial hardship and can give you realistic advice regarding how to deal with your current issues.
If you would like more information about our firm generally, or commercial law specifically, then click on the button to the right to read some more of our commercial law articles.