Bankruptcy Order - Bankruptcy Order is the order made by the London High Court or the local co

A Bankruptcy Order is a formal declaration made by a court, typically in the UK, stating that an individual is bankrupt. This order can be initiated by either a creditor or the debtor themselves after court proceedings. It signifies that the individual is unable to pay their debts and triggers a legal process to manage their financial affairs. While bankruptcy was once seen as a source of shame, some now view it as a way to resolve overwhelming debt.

What Happens After a Bankruptcy Order is Made?

Once a Bankruptcy Order is issued, it is published for public record in official publications like the London Gazette, and potentially in local or national newspapers. The Official Receiver is responsible for ensuring this publication.

The Official Receiver, an officer of the court, or an appointed Insolvency Practitioner, takes over the case and acts as the trustee. They report to both the court and the creditors. In some instances, the Official Receiver may arrange a meeting with creditors, who then appoint a trustee. If no such meeting occurs, the Official Receiver automatically becomes the trustee. The trustee's primary role is to realize (sell) assets and distribute the proceeds among creditors. This process can be both slow and costly.

What Are the Official Receiver's Powers and Functions?

The Official Receiver has several key responsibilities and powers:

• To gather information from the bankrupt person, including details of outstanding assets and debts, and to verify their accuracy.
• To investigate the bankrupt person's conduct and financial affairs.
• To redirect the bankrupt person's mail.
• To inspect the bankrupt person's premises, prepare a report, and remove valuable assets that can be sold (this is more common for corporate bankruptcies).
• To assess if creditors can be paid through the bankrupt person's individual contributions or an Income Payment Order, ensuring the bankrupt person's basic needs are met first.
• To apply to the court to postpone the bankrupt person's discharge date if they have not properly fulfilled their duties during the bankruptcy proceedings.
• To ensure no payments are made to the court that bypass the Official Receiver.

Who is Notified of a Bankruptcy?

After you are declared bankrupt, the Official Receiver must inform several parties about your bankruptcy status:

• Your mortgage lender, who may retain assets if you cannot make payments.
• Banks and building societies where you hold accounts.
• Utility providers (e.g., telephone, electricity).

The Official Receiver typically does not directly notify credit reference agencies. Instead, these agencies gather information from public sources such as the Individual Insolvency Register, newspaper advertisements, the London Gazette, and the Register of County Court Judgments. However, if an order is obtained to prevent public advertisement, the Official Receiver will then inform credit reference agencies directly.

What Privileges Are Restricted for a Bankrupt Person?

Once declared bankrupt, certain privileges and activities are restricted:

• You cannot obtain credit above a specific monetary threshold (e.g., £500) individually or jointly without disclosing your bankruptcy status.
• You cannot act as a managing director of a company.
• You cannot start a business using a name different from the one under which you were declared bankrupt.
• You may be barred from holding certain public offices.

What is a Certificate of Summary Administration?

Alongside a Bankruptcy Order, the court often issues a Certificate of Summary Administration, particularly if the bankruptcy order resulted from a debtor's petition. It's advisable to request this certificate immediately if the court doesn't issue it automatically, as it simplifies the entire procedure and reduces costs. With this certificate, the Official Receiver administers the case, often proceeding without extensive investigation, and the bankrupt person typically receives discharge within two years.

However, a Certificate of Summary Administration cannot be issued if debts exceed a specific threshold (e.g., £20,000). In such cases, the Official Receiver may arrange a meeting with creditors, who then appoint a trustee. This process is generally slower and more expensive. Otherwise, the Official Receiver becomes the trustee.

Can You Prevent Your Bankruptcy from Being Published?

Yes, it may be possible to prevent your Bankruptcy Order from being published. If you anticipate applying for an annulment of the order and wish to prevent its publication, you must immediately inform the court by phone and apply for a stay of advertisement. You must also notify the Official Receiver of your intention and provide all necessary information. The court will only consider your application once the Official Receiver confirms receipt of the required data. Only a court order can prevent such advertisements from being published.

What Does Annulment of a Bankruptcy Order Mean?

Annulment of a Bankruptcy Order means its cancellation. Once an annulment is granted, it's as if the Bankruptcy Order was never made, allowing the individual to revert to their pre-bankruptcy status. However, any assets already dealt with by the Official Receiver or trustee cannot be reversed. Remaining assets may be returned, and the individual remains responsible for any pending debts incurred during the bankruptcy period.

Annulment can only be granted under specific circumstances:

• If the Bankruptcy Order was issued in error.
• If the bankrupt person has paid their debts, fees, and court expenses to the court's satisfaction.
• If the bankrupt person has entered into an Individual Voluntary Arrangement (IVA) with their creditors.

How Are Bankruptcy Records Maintained?

To safeguard public welfare, several records are maintained regarding bankrupt individuals:

• Details of Bankruptcy Orders and Individual Voluntary Arrangements made in England and Wales are meticulously updated in the Individual Insolvency Register.
• Bankruptcy Petitions and Orders are registered with the Land Charges Department of HM Land Registry.
• If the bankrupt person solely owns property, a Bankruptcy Notice (to protect creditors' rights) and a Bankruptcy Restriction Notice (to prevent further dealings with the property) will be registered against the title. If the property is jointly owned, a specific legal form (e.g., Form J) will be registered against the title.

Similarly, any annulment of a Bankruptcy Order is updated in these records. The court must explicitly mention this in the annulment order and specify who is responsible for informing the Land Charges Department to update the records.

What is a Bankruptcy Restriction Order (BRO)?

A Bankruptcy Restriction Order (BRO) or Bankruptcy Restriction Undertaking (BRU) is a civil measure designed to protect the public from irresponsible bankrupt individuals in England and Wales. The Bankruptcy Restriction Search is a database containing information about misconduct by individuals subject to these orders. Bankrupt individuals under a BRO face an extended period of bankruptcy, typically between 2 to 15 years, due to their conduct.

When Does Discharge from Bankruptcy Occur?

Discharge from bankruptcy signifies the end of most bankruptcy restrictions and relief from most debts owed at the date of the Bankruptcy Order. However, certain debts are typically exempt from discharge:

• Secured creditors (e.g., mortgages).
• Maintenance orders and family court debts.
• Fines.
• Debts obtained through fraud.
• Debts from certain injury claims.
• Debts from other orders of a criminal court.

Under current rules, bankruptcy generally ends automatically after one year. If a Certificate of Summary Administration was attached to the court order, this period might be two years. The trustee usually has a maximum of three years to deal with the bankrupt person's interest in their home.

For individuals declared bankrupt under older regulations or with previous bankruptcies, the discharge period may vary. Once discharged, the court issues a certificate to the debtor.

Even after discharge, the trustee may still control certain assets acquired by the bankrupt person before discharge, which they can deal with in the future, though usually not for an extended period. Any assets obtained after the discharge date remain with the formerly bankrupt individual.

Frequently Asked Questions

What is the role of the Official Receiver in bankruptcy?

The Official Receiver is an officer of the court or an appointed Insolvency Practitioner who acts as a trustee in bankruptcy cases. Their role includes gathering information, investigating the bankrupt person's affairs, managing assets, reporting to the court and creditors, and ensuring the bankruptcy process adheres to legal requirements.

Can I prevent my bankruptcy from being publicly advertised?

Yes, it may be possible. If you intend to apply for an annulment of the Bankruptcy Order, you can immediately contact the court and the Official Receiver to apply for a "stay of advertisement," which can prevent the order from being published publicly. This requires prompt action and providing all necessary information to the Official Receiver.

What does it mean to have a bankruptcy order annulled?

Annulment of a Bankruptcy Order means the order is canceled, effectively treating it as if it never occurred. This allows the individual to return to their pre-bankruptcy status, though any assets already liquidated by the trustee cannot be recovered. Annulment is typically granted if the order was issued in error, debts have been fully paid, or an Individual Voluntary Arrangement has been established.

When can I expect to be discharged from bankruptcy?

Under current regulations, most individuals are automatically discharged from bankruptcy after one year. In cases where a Certificate of Summary Administration was issued, the discharge period might be two years. For individuals declared bankrupt under older laws or those with a history of previous bankruptcies, the discharge timeline can vary.