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DEBTORS who attempt to avoid creditors by fleeing Hongkong would find themselves presented with a bankruptcy petition if recommendations on the changes to the territory's bankruptcy laws are implemented.

   Bankrupts should also be allowed to keep more than the present maximum of $3,000 in assets, and find it easier to be discharged from bankruptcy, according to recommendations presented yesterday by the Law Reform Commission.

 It also puts forward suggestions for avoiding bankruptcy by making it easier for debtors to approach creditors at an early stage and attempt to find a solution to their problems which does not involve full bankruptcy.

   The commission recommends more than 100 changes to the present system, including the replacement of bankruptcy notices with a statutory demand for payment.

  Debtors who fail to make payment under the terms of the demand would be deemed unable to pay their debts, although the demand would not need to be based on a judgment.

  At present, most bankruptcy petitions are based on the failure of a debtor to pay a judgment debt in compliance with a bankruptcy notice.

  Under the demand system, the debtor would effectively be required to pay the debt within 21 days of service or face the creditor presenting a bankruptcy petition.

  To dissuade debtors from skipping the territory to avoid payment, the commission proposes the introduction of a new tool.

  ''The recommendation is that a creditor may present a petition for bankruptcy if a debtor intends to depart or has departed out of Hongkong knowing that a necessary consequence of his departing would be to defeat or delay his creditor, even if his absence from Hongkong had nothing to do with his debts.''   The document also recommends widening the jurisdiction of the court from the present criteria of domicile in Hongkong or personal presence in Hongkong on the day the petition is presented.

  As one way of avoiding the final step of bankruptcy the commission proposes individual voluntary arrangements, which would allow a debtor to seek a stay on proceedings under the protection of the court while an arrangement was discussed.

  The present rules on property that may be retained by a bankrupt should also be modified, says the commission.

   The present $3,000, which includes tools of the trade and domestic goods, is unrealistic, says the sub-committee which drew up the report.

  It has made a series of recommendations which would allow a bankrupt to retain considerably more property, and could even give trustees the discretion to allow a bankrupt to retain large parts of his property, as long is it would ultimately benefit the estate.

   So daunting are the current provisions for the discharging of bankruptcy that in the 10 years to 1992, only 23 bankrupts were finally discharged, the sub-committee says.

  To make the process easier, it is recommended that there should be an automatic discharge three years after the date of the bankruptcy, although objections to this could be lodged.

  Among the grounds for objection would be the likelihood of the bankrupt, within five years of the date of bankruptcy, being able to make a significant contribution to his estate, or that discharge would prejudice the administration of the estate.

  Automatic discharge could also be challenged if the bankrupt had failed to co-operate on the administration of the state, or had continued to trade after knowing himself to be insolvent.



Law change move to stop debtor fleeing