6.1    In 1994 Justice (the British section of the International Commission of Jurists) published a report on insolvency law⁵, observing, "pressure on scarce [government] resources could be alleviated by recognising that not all bankrupts are the same. There is growing public unease about the ‘easy ride’ enjoyed by, say, fraudulent bankrupts with multi-million pound debts, and the comparative harshness of using the full panoply of the bankruptcy regime, with its attendant stigma, for honest debtors who may be guilty of nothing worse than having had the misfortune of losing their jobs, and therefore their ability to service consumer debts". Leaving to one side the proposition that fraudulent bankrupts enjoy (or ever have enjoyed) an "easy ride" the thrust of the Justice argument is that the process and outcome of bankruptcy is the same no matter what degree of culpability attaches to the conduct of the debtor which led to his or her insolvency. However a distinction between bankrupts clearly can be drawn where criminal proceedings are taken against them in relation to bankruptcy or other criminal offences.

6.2    In 1998/99 Official Receivers (whose statutory duty it is to investigate the affairs of bankrupts) submitted the following reports alleging criminal offences by bankrupts:

6.3    This represents a reporting rate of about 5% of the bankruptcy cases in the year, although that understates the extent of misconduct that Official Receivers identify but which does not justify further resources being expended on investigation. Of the convictions obtained, the outcomes included 101 sentences of community service, 74 cases resulted in conditional discharges and 105 in prison sentences. In 20 of those latter cases the prison sentence was for a period of two years or longer.

6.4    Regardless of any conviction for criminal offences in relation to their bankruptcies, bankrupts are still automatically discharged from bankruptcy after three years. (Where the bankruptcy order is made on the petition of a debtor, the debts owed are less than £20,000 and the court makes a ‘summary order’ the Official Receiver will be trustee (because there are minimal if any assets) and the automatic discharge period will be two years rather than three. Such orders are made in about 15% of cases, again without reference to the debtor’s conduct that led to their insolvency). The only basis for the court to suspend an automatic discharge is the bankrupt’s failure to co-operate with the Official Receiver or the Trustee. The exception to the automatic discharge rule is an individual who has been bankrupt within the previous fifteen years. Such a person must apply to the court for a discharge and may not apply until five years have elapsed since the making of the second or subsequent bankruptcy order.

⁵ Insolvency Law - An agenda for reform - 1994
⁶ The outcomes reported include those relating to reports submitted in earlier years