Once an individual is made bankrupt the majority of their assets vest in their trustee and they are subject to restrictions until they are discharged from bankruptcy. The below represents a list of frequently asked questions relating to bankruptcy.
If your question does not appear below then please do contact us.
What will happen after a bankruptcy Order is made?
Sometimes an insolvency practitioner is appointed, or alternatively the initial trustee in bankruptcy, the official receiver may administer the bankruptcy. The insolvency practitioner will then investigate your dealings and sell off any assets In order for any realisations to be distributed parri passu or on a pro rata basis amongst the creditors. Such assets may include your home.
You should receive correspondence from the Official Receiver in the first instance, which will request disclosure of information relating to your assets, including details of all bank accounts that you hold.
How will the bankruptcy order affect me?
There are a number of ways that a bankruptcy order will affect you:
- All of your assets will vest in your Trustee in Bankruptcy;
- Any money held in any of your bank accounts will be counted as your property and therefore will vest in your Trustee in Bankruptcy. The Official Receiver will likely contact your bank(s) to stop any further transactions taking place without their (or your Trustee in Bankruptcy’s) authorisation, and will request the transfer out of any surplus balance. Your half share of any joint accounts will vest in your Trustee in Bankruptcy.
Whilst you are an undischarged bankrupt, you cannot:
- obtain credit in excess of £500 without notifying of the fact that you are an undischarged bankrupt;
- act as director of a company or directly or indirectly to take part in or be concerned in the promotion, formation or management of a company (without the leave of the court);
- Trade under a different name unless you disclose the fact that you are an undischarged bankrupt;
- Act as a charity trustee (without permission);
- Act as a pension trust trustee;
- Practice as a solicitor (without leave of the Solicitors Regulation Authority);
- Act as a trustee of a charity (without permission).
If you are in a partnership, on bankruptcy the partnership will automatically dissolve unless there is a contrary provision in the partnership agreement.
What will happen to my assets?
The majority of your assets will vests in the Trustee in Bankruptcy. The Trustee will request delivery of the assets so that can be sold.
There are certain assets that will your Trustee in Bankruptcy will not be able to claim, such any assets required for basic domestic needs. A Trustee in Bankruptcy will usually allow you to keep any tools of your trade, including vehicles; however, a Trustee in Bankruptcy can request that you replace these which cheaper alternatives if they are available.
What are my obligations to the Trustee in Bankruptcy?
You have an obligation to give to your Trustee in Bankruptcy information requested, attend meetings with your Trustee in Bankruptcy and do all such other things as required by your Trustee in Bankruptcy.
You also have an obligation to notify your Trustee in Bankruptcy within 21 days if your income increases of you receive an interest in any property during the period of your bankruptcy.
What will be classed as a bankruptcy debt?
A bankruptcy debt:
- any debt or liability to which you owe from the date of your bankruptcy;
- any debt or liability to which you may owe after the date of your bankruptcy (including after his discharge from bankruptcy) which arises from any obligation incurred before the date of your bankruptcy.
Who will be a creditor in my bankruptcy?
Most people who you owe a debt to at the date of your bankruptcy. It does not include, however, debts such as those arising from child support obligations or student loans.
Do I need to tell my employer if I have been made bankrupt?
Generally the answer is no. This depends on the terms of your employment or whether you are employed in a specific (and normally regulated) role which does not allow persons who are bankrupt to work in that particular field.
What happens to my income?
You will continue to receive your income. Depending on the facts of each case, the Trustee in Bankruptcy may apply to court for what is known as an Income Payments Order, whereby you are ordered to pay a monthly sum to your Trustee in Bankruptcy towards your bankruptcy estate. An Income Payments Order will only be made if you have sufficient income to afford the proposed instalments after taking in to account living costs.
When will my bankruptcy come to an end?
Your bankruptcy will be automatically discharged after a period of one year. You will thereafter be a discharged bankrupt.
Can a Trustee In Bankruptcy extend this period?
A trustee in bankruptcy has the ability to apply to court to extend their period of your bankruptcy if you have failed to cooperate with the trustee in bankruptcy. The period can be extended indefinitely until you have cooperated.
Can I challenge or remove the bankruptcy Order?
Yes. There are options available to you after you have been made bankrupt to ask the court to annul your bankruptcy on the ground that the bankruptcy order should not have been made, or on the basis that you have paid your debtors in full:
Annulment of bankruptcy Order on grounds that the order should not have been
You can apply to
This of course very case specific and there are a range of grounds that may lead to annulment. Examples include that you have strong grounds to dispute the underlying debt or it was never owed in the first place or that the documents were not served correctly by the petitioning creditor.
A court will consider the facts of each case and the grounds existing at the time of the order was made. If a court is satisfied that a bankruptcy Order ought not have been made based on the grounds existing at the time, the court has a discretion to annul the bankruptcy Order.
Annulment of bankruptcy Order on the basis that all bankruptcy debts and expenses have been
You can apply to the court to have your bankruptcy annulled if you can show to the court that your bankruptcy debts and the expenses have all, since the making of the order, been either paid or secured for.
Annulment of b
ankruptcy Order following entry into an Individual Voluntary Arrangement
Please see ‘Individuals facing Bankruptcy‘ for more information.
Rescission of bankruptcy Order
The court also has the power to rescind a bankruptcy order. This option is similar to the applying to court on the basis that the order ought not to have been made, however, the difference is that the court can take in to account a change in circumstances from the date of the bankruptcy Order. An example would be that you successfully appealed an underlying court Order which formed the basis for the bankruptcy Petition.