When the court or the adjudicator makes a bankruptcy order, it will pass its files to the Official Receiver (OR), who is a person who works for the. The bankrupt debtor has to give the OR a statement of affairs within 21 days of the bankruptcy order. The OR must, within 12 weeks of the bankruptcy order, decide whether to appoint themselves as trustee in bankruptcy (TIB) or instead call a meeting of creditors to enable them to appoint an insolvency practitioner of their choice as the TIB.
The ownership of all the assets in the bankrupt's estate passes to (vests in) the TIB automatically on their appointment. The main duty of the TIB is to convert the value of the assets in the bankrupt's estate to money. From these proceeds the TIB will first pay their own costs and expenses and then the balance available will be used to pay off as much of the 'bankruptcy debts' as possible. The TIB has wide powers to enable them to perform their duties.
All assets, including the debtor's sole or principal residence, property acquired after the bankruptcy order and choses in action, in which the bankrupt debtor has an interest form part of the bankrupt's estate except the following:
However, special rules apply to the debtor's beneficial interest in their home or main home or in the home or main home of their present or former spouse or civil partner. This interest will automatically re-vest in the debtor 3 years after the bankruptcy order unless by then the TIB has:
Unless the court orders otherwise, the beneficial interest will also re-vest automatically in the debtor if the TIB makes an unsuccessful application in respect of the home.
If the Official Receiver is the TIB they will deal with the debtor's home as follows:
If there is sufficient equity and if the OR is not aware of any willing purchaser the OR can apply for a Secretary of State appointment of an insolvency practitioner as trustee of the bankrupt estate to deal further with the property.
If the value of the interest is more than a £1,000 but is insufficient to attract the appointment of an insolvency practitioner, the OR would invite offers from the debtor or another connected person (for example the debtor's spouse) to buy the interest. If no offer is received that would allow transfer of the interest before expiry of the 3-year period, the OR could apply for a charging order against the property.
If the value of the interest is less than £1,000 the OR will take steps to re-vest the beneficial interest in the debtor.
However, any assets acquired by the debtor after discharge of the bankruptcy order do not vest in the TIB, but belong to the ex-bankrupt.
To be recognised as a bankruptcy debt the claim must be payable in money (or money's worth) and arise from an obligation incurred prior to the date of the bankruptcy order. This means that the debt can either be due at the date of the bankruptcy order or it can fall due only after the bankruptcy order as long as the obligation which resulted in the debt occurred before the date of the bankruptcy order. If this is not the case the claim will not be counted as a bankruptcy debt.
A debtor will be under an 'obligation' if, at the date of the bankruptcy order, there was a genuine possibility of a payment liability arising out of some form of legal relationship or duty.
The debt can be contractual, a tortious liability, a liability created by statute, etc. It doesn't matter whether the debt is certain or contingent and whether the amount is fixed or only capable of being determined by rules or opinion.
Any interest due on a bankruptcy debt with regard to the period prior to the bankruptcy order can be proved as part of the bankruptcy debt.
An exception to the above is that child support maintenance can't be a bankruptcy debt.
To prove for their debt in bankruptcy the creditor will complete a Proof of Debt Form (Form 6.37). In this form the creditor will state how and when the debt was incurred, the total amount of the claim and the amount of any un-capitalised interest. The creditor can also attach to the form any documents in support of the claim.
After proofs of debt have been lodged with the TIB they will be available to be inspected by:
If the TIB agrees thereto, a creditor that submitted a proof may at any time thereafter withdraw it or change the amount claimed.
If the OR received any proofs before the TIB was appointed, they must send them with an itemised list to the TIB. The same will happen should a new TIB be appointed.
The TIB can admit a proof either for the whole or part of the amount claimed. If they reject all or part of the amount claimed, they have to provide the creditor that submitted the proof with written reasons for doing so. If this creditor is not satisfied with the reasons they can, within 21 days from the date of receiving the reasons, appeal to the court to have the decision reversed or varied.
Any other creditor and the bankrupt may also appeal the decision of the TIB on any proof and may do so to the court within 21 days of becoming aware of the TIB's decision.
If the TIB is of the opinion that a proof has been improperly admitted, they can apply to court to have it expunged or the amount reduced.
The trustee in bankruptcy (TIB) has wide powers with regard to the bankrupt estate once it has automatically vested on their appointment.