5.1    Our present bankruptcy arrangements may be summarised as follows. A debtor who is insolvent gives up nearly all of his assets and is subject to the bankruptcy regime (its disabilities, post-bankruptcy income and after-acquired property regimes) in return for a discharge (which is automatic after three years – two years in small cases) from (with very limited exceptions) all his debts.

5.2    All property belonging to, or vested in, the bankrupt at the date of the Bankruptcy Order (with limited exceptions) forms part of his estate. In addition, any property acquired by the bankrupt during the period of his bankruptcy may be claimed by his Trustee and the bankrupt has a statutory duty to notify his Trustee if he acquires, or has devolved upon him, any property during the period of his bankruptcy or if there is any change in his income. Failure to do so places the bankrupt in contempt of court. This latter requirement is almost impossible to police and the Trustee is in practice reliant on what the bankrupt (or occasionally a third party) chooses to tell him.

5.3    Some property is exempt from the claims of the creditors. This comprises items of equipment required by the bankrupt for his personal use in his employment, business or vocation and such clothing and household items as are required to meet the basic domestic needs of the bankrupt and his family. The Cork Committee saw such exemptions as not only offering the bankrupt the opportunity to maintain himself and his family in decent conditions but also the possibility that, by using the tools of his trade or other business assets, he might generate funds for his creditors.

5.4    The bankrupt (irrespective of whether he has obtained his discharge from the proceedings) will remain liable for certain debts under insolvency and other legislation, for example debts incurred by fraud, fines and court-ordered maintenance payments. In addition a Bankruptcy Order will not affect the right of a secured creditor to enforce his security in respect of the non-payment of any debt that is secured.

Disabilities

5.5    An undischarged bankrupt is subject to a number of disabilities under insolvency legislation, principally:

• A restriction on obtaining credit over £250 without revealing his undischarged status;

• A prohibition on trading in a name other than that under which he was adjudged bankrupt, without disclosing the name under which he was so adjudged;

• A prohibition on being a director of or taking part in the management of a limited company without the leave of the court.

A detailed list of disabilities and prohibitions consequent to bankruptcy is given at Annex B