Insolvency Made Clear: A Guide for Debtors

Effect Of Bankruptcy
by giving notice to the bankrupt and to anyone else with an interest in the property
and the court.
Property which has been disclaimed does not go back to the bankrupt. Since the
Trustee gets nothing from a disclaimer (they merely avoid a liability) it may be
possible to persuade a Trustee to sell the property to a friend of the bankrupt
for a token amount.
Box 6:
RELATIONSHIP WITH THE TRUSTEE
The Trustee plays a crucial part in the life of the bankrupt. They can
decide what the bankrupt can spend money on, what items they can
keep and what is to be sold. They can apply for the bankruptcy to be
extended beyond its usual length of a year. They decide whether they
believe that the bankrupt has committed any misconduct. If the Trustee
thinks the bankrupt has, the Trustee will be responsible for what
happens next. If the Trustee feels they can rely on the bankrupt, they
are less likely to dispute what the bankrupt tells them. For example,
if the bankrupt has a good relationship with the Trustee, the Trustee
will not be suspicious if the bankrupt says that an item is owned by
the spouse of the bankrupt rather than the bankrupt themselves and
so does not fall into their estate. It follows that it is vital for the bankrupt
to get on with the Trustee at a personal level. A strong working
relationship can be achieved by: 1) being open and cooperative when
asked questions; 2) being realistic about what the bankrupt will be allowed
to keep and not keep; and 3) not making any attempts to hide
assets. If the Trustee is the Official Receiver, they are unlikely to care
that the bankrupt opposed the bankruptcy petition, provided they
acted honesty during the process.
It is difficult for the bankrupt to keep calm when a stranger has so
much control over their life. A Trustee should do their best to explain
what they are doing and why. Not all Trustees are diligent. However,
although it will take a large amount of effort to be polite and courteous
to the Trustee, the effort will be rewarded. Put differently: there
can be serious consequences of the relationship breaking down.
Chapter 8 discusses ways in which a bankrupt can control the Trustee’s
actions. These are challenging applications to make.
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