Insolvency Made Clear: A Guide for Debtors

Insolvency Law Made Clear – A Guide For Debtors
at fault. The guidance recognises that a person may be made bankrupt through
little or no fault of their own if they were the victim of the poor business decisions
of others.
The guidance and the form are not clear on how the Home Office treats other
forms of insolvency procedure other than bankruptcy, such as entering into an
Individual Voluntary Arrangement. Since individuals who sign an IVA will be
on the public insolvency register alongside bankrupts, the Home Office is likely
to notice. The Secretary of State has wide discretion when applying the good
character test, and would be entitled to consider the effect of an IVA. However,
the accurate answer to question 3.14 is ‘no’.
For more information on applying for citizenship, the reader is directed to the
CLP Legal Practice Guides on Immigration Law.
2.12 After-acquired property
While a debtor is still an undischarged bankrupt, they must notify the Trustee
if they acquire any additional property or if there is an increase in their income
within 21 days of receiving it (r10.125(1)). They cannot dispose of it without
the Trustee’s consent until 42 days after giving notice, and if they do they have a
duty to disclose the name to whom they disposed of the property, for the Trustee
to decide whether to attempt to recover it. Failure to comply with this section
without a reasonable excuse is contempt of court (s333(4) of the Act).
This provision is intended to capture cases where the bankrupt receives a windfall:
for example, they win the lottery or receive an inheritance. If the amount is
substantial (in practice, more than a few hundred pounds) the Trustee is likely
to distribute it to the creditors rather than allow the bankrupt to keep it for
themselves. The Trustee cannot acquire any income of the bankrupt which they
earned following the bankruptcy order by notice (s307(5)). Instead, the Trustee
will have to apply for an income payment order or make an income payment
agreement with the bankrupt.
2.13 Income payments orders
Only property which falls within the bankrupt’s estate gets transferred to the
Trustee. The bankrupt’s estate is defined in terms of property belonging to the
bankrupt when the bankruptcy order is made (s283(1)). This means that future
income does not automatically belong to the Trustee.
However, the Trustee has the power to apply for an income payments order
(IPO) under s310 of the Act. This is an order which claims any income received
by the bankrupt beyond the amount needed to satisfy their reasonable domestic
needs and the needs of their family. ‘Income’ here includes business income,
30