Bankruptcy a tool, not a stain
ON FRIDAY, May 25, 2018, an interesting article, authored by Christopher Pryce, appeared in The Gleaner titled ‘The stain of bankruptcy’. The article shows that there is still some level of misunderstanding about bankruptcy, and emphasises the need for the Office of the Supervisor of Insolvency to continue our public awareness campaign on the new insolvency regime.
As society evolves and business practices advance internationally, the law must also evolve to ensure that rules and regulations are established to guide those advancements. To that end, the modernisation of the bankruptcy regime of Jamaica was undertaken and a new insolvency regime, introduced by the Insolvency Act, 2014, came into force on January 2, 2015.
The act’s main objectives are the rehabilitation of debtors and the preservation of viable companies, having due regard to the protection of creditors’ rights. The overriding interest is to strengthen and protect Jamaica’s economic and financial system, and the availability and flow of credit within the economy. The negative stigma should be removed and bankruptcy should, henceforth, rightly be viewed as a tool that has many positive attributes attached thereto.
Assistance is available via three mechanisms under the new regime:
1. Proposals: The method by which insolvent persons reorganise or restructure their affairs in order to avoid bankruptcy.
2. Receiverships: The mechanism by which creditors put an insolvent person into bankruptcy by making an application to the Supreme Court for a receiving order.
3. Assignments: The means by which insolvent persons voluntarily enter bankruptcy.
Once the provision of the new regime is invoked, some of the benefits to an insolvent debtor include the automatic stay of legal proceedings; no interest accrues on an unsecured debt after the date of bankruptcy and the provision of financial counselling. Creditors have surety of payment as assets automatically vest in a trustee for the general benefit of creditors. These advantages become operable at various stages of the insolvency process.
Under the new regime, viable companies can be rehabilitated and bankrupts, who prior to bankruptcy were burdened and stressed, will be empowered and retooled to handle their financial affairs. Accordingly, until the rehabilitation, empowerment and retooling is attained, these bankrupts will be unable to obtain credit, among other things. However, limitations are removed once bankrupts are discharged, except in limited circumstances.
Importantly, persons do not have to wait until they are insolvent to access the assistance afforded by the new regime. If a person reasonably anticipates that within the next 12 months, she/he may become insolvent, that person may now make a proposal to creditors, and, if the proposal is accepted, thereby avoid insolvency. This is but a synopsis of the new insolvency regime which, at its core, seeks to rehabilitate debtors while balancing the rights of creditors.
Bankruptcy is not a disease; it is for responsible persons who seek financial freedom. Therefore, bankruptcy should no longer be viewed as an affliction, but a sound business practice to restructure one’s financial affairs. Bankruptcy is a tool, not a stain.
For further information, please feel free to contact the Office of the Supervisor of Insolvency, as we aim to ensure that accurate information on the new insolvency regime is provided. The office can be contacted at (876) 929-8332 or at info.osi@micaf.gov.jm.