UK’s “small proportion of bankruptcies where there has been misconduct leading up to the individual’s insolvency”

With the Australian parliament about to decide on the reduction of the period of bankruptcy from three years to one, there is some adverse reaction to the reform, said to be typical of Australia’s attitude to debt, that the lesser period will provide greater opportunity for debtors to avoid the consequences of bankruptcy by hiding or transferring their assets, without investigation or recovery.

That depends on the extent to which that sort of pre-bankruptcy conduct occurs.  Many bankrupts were never in a position to have had any substantial assets to be transferred.  Others, a smaller category, will have, and bankruptcy law provides remedies for that.

Bankruptcy restriction orders

England has had a one-year period of bankruptcy for some years, along with its debt relief orders. There is no concept of an ‘objection to discharge’ by the trustee, such as in Australia, but ‘bankruptcy restriction orders’ can be imposed if misconduct is identified.  These are usually given as agreed undertakings, although some are imposed. (The nature and purpose of these orders is usefully discussed in Weir v Hilsdon [2017] EWHC 983 (Ch)). English law does also not impose income contributions.

In its latest annual report, the UK Insolvency Service reports on its bankruptcy investigations for the 2017-2018 year and comments that it is

“responsible for identifying the small proportion of bankruptcy and debt relief order cases where there has been misconduct leading up to the individual’s insolvency.

In those cases we carry out investigations to ensure creditor interests and the wider public interest are protected. Where we have identified misconduct by individuals we take proceedings to place restrictions on the ability of those concerned to obtain credit in the future.

Cases targeted include those where individuals have acted dishonestly, with mal-intent or abused the protection offered by the bankruptcy regime with a view to depriving creditors of monies that were rightfully theirs”.

The Insolvency Services reports that in 2017-18, it secured 432 bankruptcy restriction orders and 12 debt relief restriction orders. Of those orders:

• the average period of restriction was 5 years for bankruptcy restriction orders and 4.3 years for debt relief restriction orders;

• 28.5% bankruptcy restrictions and 25% debt relief restrictions were over five years.

Those figures are in respect of a population of over 60 million, and over 45,000 new personal insolvencies annually.


The position may be similar in Australia, although some conjecture from the statistics is necessary.  AFSA has reported that trustees lodged only 519 objections to discharge in 2016-2017 in relation to the 57,923 persons who were in bankruptcy, a factor of .009%.

The Australian parliament may decide on this change in the law this week, commencing 20 August 2018.


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