Government to reduce bankruptcy to one year

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Bankruptcy will likely be reduced to one year after the second reading in parliament on Oct. 19th.

A Bankruptcy Trustee may extend the bankruptcy period in case of misconduct but the Government seems bent on shortening the period, believing that it will reduce the stigma of failure and encourage entrepreneurial activity.

Some of the key changes are: the discharged bankrupt being able to apply for credit without having to disclose their bankruptcy after the one-year period, compulsory income contributions to continue for discharged bankrupts for at least two years after discharge, and all bankruptcies on foot will be discharged if they are at least one year old.

The Government believes that entrepreneurs often fail a couple of times before reaching success and it is important to aid them in learning lessons along the way. It also believes that owners of distressed companies will likely give up their assets and business, which will reduce the damage to the creditors rather than delay liquidation.

Others, however, argue that it rarely occurs in practice and the reduced penalty may even become an incentive to delay. They say one year is short and may be seen as worth the risk. Others are concerned that the cost will be borne by small-to-medium-sized businesses.

The one-year bankruptcy seems to be upon us and business people have to do everything they can to protect themselves.

What can you do?

If you would like to know more about how you can protect your assets, you can click here to know more about Chan & Naylor services. You can leave your details here and we can schedule you for a free consultation. We’ll contact you to explain more.

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