Reviewable transactions and claims that can be made by a Trustee

When an individual is made bankrupt, the Trustee in Bankruptcy has an obligation to investigate their affairs in the period leading up to the making of the Bankruptcy Order.

Certain types of “antecedent” transactions entered into by a Bankrupt before they were made bankrupt may be challenged by the Trustee in Bankruptcy resulting in the assets disposed of at a time when it was inappropriate, unfair or wrong to do so been returned to the Bankrupt’s estate.

In most cases, the Trustee in Bankruptcy challenges a transaction by making an application to Court. If the challenge succeeds, the court has a wide discretion to make order undoing the effect of the transaction for example, by ordering the return of assets to the Bankrupt's estate or ordering that the recipient of the asset pays a sum to the Bankrupt’s Estate.

The transactions, which may be challenged, are

a) Transactions which took place after the Bankruptcy Petition was presented Read more

Any transfers or disposals of property made after the presentation of a Bankruptcy Petition are usually void unless they are approved by the Court.

b) Transactions at an undervalue Read more

Transactions at an undervalue occur where a Bankrupt transfers an asset to another party as a gift or otherwise for no consideration or for significantly less than the asset's true value or enters into a transaction in consideration of marriage or the formation of a civil partnership.

Examples of a transaction at an undervalue include:

•    The transfer of property for no consideration

•    The transfer of shares for no consideration

•    Gifts

•    Providing goods or services for no consideration and

•    Buying goods or services that are worthless, or the value of which is significantly less than the price paid

c) Preferences Read more

A preference occurs where a Bankrupt does something that puts a creditor, surety or guarantor in a better position than it otherwise would have been on the making of a Bankruptcy Order. There must have been an intention to put the creditor, surety or guarantor in a better position than the Bankrupt's other creditors.

Paying back loans from family members rather than third party creditors and granting a charge over a property to secure the debt are examples of preferences.

d) Excessive pension contributions Read more

A Bankrupt's rights under any pension arrangement are normally excluded from his estate or, in the case of unapproved pension schemes, capable of being excluded.

A Trustee in Bankruptcy is however permitted to make an application to the Court to recover excessive pension contributions made by the individual before his bankruptcy. 

In addition, the Trustee in Bankruptcy may apply to the court to recover excessive pension contributions where an individual who is adjudged bankrupt has rights under an approved pension arrangement or excluded their rights under an approved pension arrangement.

e) Transactions defrauding creditors Read more

A transaction can be set aside it is entered into at an undervalue and the purpose of the transaction was to put assets beyond the reach of a person who is making or may make a claim against the individual, or to otherwise prejudice a person's interests in relation to such a claim.

Transferring assets to a spouse (such as the matrimonial home) to avoid a creditor from taking recovery action against the assets is an example of a transaction defrauding creditors.

 

What can be recovered by the Trustee in Bankruptcy?Read more

The Court has the power to make a variety of orders to enable a recovery for the bankruptcy estate.

Such orders can:

•    Require any property transferred as part of the transaction, or in connection with the giving of the preference, to be returned to the bankrupt's estate

•    Release or discharge (in whole or in part) any security given by the individual

•    Require any person to pay, in respect of benefits received by him from the individual, such sums to the Trustee in Bankruptcy

 

 

How can we help?

If you are have been contacted by the Official Receiver or a Trustee in Bankruptcy regarding a transaction which you entered into with an individual who is now bankrupt, please contact us for advice and assistance.

We have experience of settling and defending various reviewable transactions.