Insolvency Made Clear: A Guide for Debtors

Insolvency Law Made Clear – A Guide For Debtors
will receive the same proportion of their loan as the other unsecured creditors.
However, one notable exception is the spouse of the bankrupt. Spouses are demoted
in the ordinary order since they are only repaid after the interest on debts
is paid (s329 of the Act). To re-use the above example, if the unsecured debts
can be broken into £30,000 from a bank, £10,000 from the bankrupt’s parents
and £10,000 from the bankrupt’s spouse, the bank and the parents would share
the £5,000 and would receive £3,750 and £1,250 respectively (they would each
receive 12.5p in the pound). The spouse would receive nothing.
The consequence of this order of distribution is that family members should be
aware of the risk of lending money to someone who might go bankrupt: they
are likely to receive the same return as the other creditors which is typically a
few pennies in the pound. If the bankrupt did repay their family shortly before
bankruptcy, the payment is likely to be undone as a preference (see Paragraph
2.6 above). If a generous family member wishes to make a gift to the bankrupt,
they are unlikely to want to pay the debts of the bankrupt. The family
member, presumably, would want the bankrupt to have the money for themselves.
However, such a gift would be ‘after-acquired property’, and the bankrupt
would need to notify their Trustee of the payment under s333 of the Act. A
Trustee in Bankruptcy could claim a gift for the estate under s307 of the Act
(see below). The best way to help the bankrupt, therefore, is to purchase items
for them which the Trustee in Bankruptcy will not want to resell, for example,
to do the shopping for them, rather than give them the money to shop themselves.
The alternative would be to agree the terms of the gift with the Trustee in
Bankruptcy before it is made.
If all the bankrupt’s creditors are paid, the bankruptcy will be annulled (see
Paragraph 9.2).
This distribution is the only amount creditors will receive. Creditors are not able
to demand repayment through other routes, like sending in bailiffs, by virtue of
s285 of the Act.
2.15 Publicity of bankruptcy
The name of the bankrupt, their address and their occupations are published on
the public Insolvency Register. The register can be found at https://www.insolvencydirect.bis.gov.uk/eiir/.
In practice, it is unusual for members of the public
to check the Insolvency Register. However, it remains a matter of public record
and it is routinely relied on by banks and potential lenders. There will also be a
notice with similar information made in the London Gazette, which is at https://
www.thegazette.co.uk/.
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