If you have been made bankrupt - there are a number of important restrictions to be aware of. Our team can help advise you on all aspects of bankruptcy and how best to remove or cancel the bankruptcy order. Call us today.
If the court has made a bankruptcy order against an individual, the court will contact the Official Receiver (who is a civil servant in the Insolvency Service and an officer of the court) to review the bankrupt’s affairs.
The Official Receiver has responsibility from the date of the bankruptcy order for administering the bankruptcy estate and protecting the bankrupt’s assets for the benefit of the bankrupt’s creditors.
The Official Receiver will normally arrange a meeting to
- examine the bankrupt to obtain details of assets and liabilities;
- to obtain information regarding the background to the making of the bankruptcy order; and
- to obtain details of the bankrupt’s affairs leading up to the making of the bankruptcy order.
The Official Receiver will provide notice of the bankruptcy to local authorities, courts, HM Revenue and Customs, utility suppliers as well as to banks, building societies and insurers to ascertain the full extent of a bankrupt’s liabilities assets and liabilities. In addition, details of the bankruptcy order will be registered at the Land Registry to prevent a bankrupt from selling property which they own.
A trustee in bankruptcy may be appointed to administer a bankrupt’s estate, which includes investigating in detail a bankrupt’s affairs their affairs in the period leading up to the making of the bankruptcy order. If a bankrupt has disposed of any of their assets, such as the matrimonial home, or made payments to specific creditors (which are known as an antecedent transactions), the trustee in bankruptcy may issue claims against the parties to the transaction to recover the asset for the benefit of the creditors.
The trustee in bankruptcy will also arrange to sell a bankrupt’s assets and distribute the proceeds to the creditors of the bankruptcy estate.
Are any restrictions placed on a bankrupt?
There are a number of restrictions which are placed on a bankrupt whilst they are undischarged. These include:
- a bankrupt must not obtain credit of £500 or more either alone or jointly with any another person without disclosing their bankruptcy.
- a bankrupt must not carry on business (directly or indirectly) in a different name from that in which they were made bankrupt, without telling all those with whom they do business the name in which you were made bankrupt;
- a bankrupt must not be concerned (directly or indirectly) in promoting, forming or managing a limited company, or acting as a company director, without the permission of the Court, whether as a director or not.
- a bankrupt must not act as an insolvency practitioner, or as the receiver or manager of the property of a company on behalf of debenture holders and cannot be a MP in England or Wales.
Are any duties placed on a bankrupt?
A bankrupt is required to comply fully with any requests made by the Official Receiver and/or their trustee in bankruptcy in accordance with the Insolvency Act 1986. Examples of requests can include providing information and documentation regarding various assets and transactions and attending for an examination.
In addition, a bankrupt is required to inform the Official Receiver and Trustee in bankruptcy if their financial circumstances change for example winning the lottery; receiving a personal injury accident claim; inheriting money or property; or receiving a redundancy payment.
How long does a bankruptcy order last and when will it end?
A bankrupt will normally be discharged from their bankruptcy after one year from the date of the bankruptcy order.
However, if a bankrupt has failed or is failing to comply with the obligations imposed on them by the Insolvency Act 1986 or the Insolvency Rules 1986, such as non-attendance at meetings, obstruction, delay or failure to provide requested information, the Official Receiver or trustee in bankruptcy can apply to the court for the automatic discharge period to be suspended passed one year until the bankrupt’s co-operation.
What debts are not written off when a bankruptcy order is made?
When a bankruptcy order is made, a bankrupt can normally stop making payments to their creditors that existed at the date of the bankruptcy order.
However, not all debts are included in a bankruptcy estate and are written off when a bankruptcy order is made. This means that a person who is made bankrupt will still remain liable for the payment of certain debts even after they have been discharged from their bankruptcy.
The debts that will not be written off on the making of a bankruptcy order are often referred to as “non-provable debts”. The list below contains some examples of the debts that are non-provable debts which are not normally written off:
1. Student loans
At present, a student loan debt is not included in a bankruptcy estate. The student loan debt is not written off and the bankrupt is still liable to make payment of the student loan.
2. Court fines and compensation orders
Court fines and compensation orders imposed for the committing of an offence or arising in respect of a confiscation order are not written off and a bankrupt is still responsible for paying off such debts.
3. Personal injury claims
Debts arising from a personal injury claim in which damages are payable will not be written off and the bankrupt will still be liable for paying the debt.
Debts that are obtained through fraud are normally not written off and a creditor can continue to pursue a bankrupt for the payment of the debt.
5. Child maintenance and child support agency payments
Obligations to pay lump sum or costs orders in family proceeds or under a maintenance assessment made by the Child Support Agency are excluded from a bankruptcy estate. A bankrupt must still make these payments.
6. Benefit and tax credit overpayments
Where overpayments of benefit payments or tax credit are made to a bankrupt before the date of the bankruptcy order and recovery action is taken after the date of the bankruptcy order to recover the overpayments the debt is not written off and the bankrupt can be pursued for the payment.
If however the overpayment of benefit payments or tax credit was made before the bankruptcy order and recovery action is taken before the date of the bankruptcy order, the debt is included in the bankruptcy estate and the bankrupt normally does not have to pay the debt. The exception to this is if the overpayment was made as a result of fraud.
7. Mortgages and secured loans
Mortgages and secured loans are secured debts. A ‘secured debt’ is where the creditor has a legal right to take action to repossess an asset if repayments are not made to the secured creditor. Examples of secured debt include a mortgage over a property or a hire purchase agreement in respect of a car.
A bankrupt is still responsible for paying secured debts after the making of the bankruptcy order. If the bankrupt does not make payments to their secured creditors after the bankruptcy order, the secured creditor can take steps to repossess the assets.
What happens to a bankrupt’s home, property and other assets
If a bankrupt has assets, including their Matrimonial Home, the Official Receiver or trustee in bankruptcy can sell the assets for the benefit of the creditors of the bankruptcy estate.
Certain items are not treated as assets such as tools, equipment or vehicles needed for work purposes and household items required by the bankrupt and their family such as furniture, clothing etc.
If a bankruptcy order has been made against you or you are facing a bankruptcy order and require assistance in respect of your bankruptcy estate or action taken against you by the Official Receiver or a trustee in bankruptcy please contact us.