Bankruptcy proceedings commence with the making of a bankruptcy order by the court. An application can be made by:

  • A creditor, owed more than £5,000,
  • By the debtor him/herself or,
  • By a Supervisor of a failed individual voluntary arrangement.

Following the making of a bankruptcy order, the Official Receiver is appointed Trustee in Bankruptcy. If the assets are likely to cover the administrative costs of the bankruptcy, the Official Receiver may convene a meeting of creditors to appoint a licensed insolvency practitioner to act as Trustee in Bankruptcy.

On bankruptcy, control of the individual’s estate (assets), with some exceptions, passes to the trustee, who has a duty to realise the assets for the benefit of creditors.

Should the bankrupt have surplus income during the three years following the order, then an element of this is likely to be paid into the bankruptcy estate by way of an Income Payments Agreement (IPA) or Income Payments Order (IPO).

There are special rules in respect of the bankrupt’s interest in the residential home; should the value of this be greater than £1,000, the trustee has three years from the date of the bankruptcy order to realise this, failing which it reverts back to the bankrupt.

A bankrupt will be subject to certain restrictions until discharge, this normally being granted a year after the making of the order, unless the bankrupt fails to co-operate, at which point the discharge can be suspended.