Insolvency Made Clear: A Guide for Debtors

Effect Of Bankruptcy
‘privileged’. The protection of privileged material applies to the spouse of the
bankrupt, or anyone else who is required to undergo a private examination. It
does not apply to the bankrupt when asked a question by the Trustee or for documents
they possess. However, the Trustee cannot then disclose the privileged
information to third parties. Two exceptions to the rule that the Trustee is entitled
to know the bankrupt’s privileged information are where a) the advice has
no relevance to the bankrupt’s estate (for example, it relates to custody of children),
or b) the advice is about a possible claim against the Trustee themselves.
Under either examination, the court can order HMRC to disclose their tax records
or correspondence with the bankrupt under s369 for the purposes of the
examination. This is another blocked avenue for a bankrupt who wishes to hide
behind their ignorance of their financial affairs.
Box 10:
BANKRUPTCY OFFENCES
A Trustee in Bankruptcy may find evidence that the bankrupt has
committed a criminal offence. For details, see Chapter 7. The Trustee
in Bankruptcy will not be the prosecutor. Instead, if the Trustee suspects
an offence has been committed, they will report it to the Insolvency
Service. The Insolvency Service will decide whether to forward
the case onto prosecutors.
A Trustee who considers that the bankrupt has not been forthcoming with information
is likely to apply for a suspension of the automatic discharge of the
bankruptcy: see Chapter 9. This will allow them more time to complete their
investigation.
2.17 Length of bankruptcy and effect of discharge
The typical length of bankruptcy is a year from the date where the order was
made (s279 of the Act). Discharge will happen automatically unless the bankruptcy
has been extended (see Paragraph 9.1 for when that can happen). After
the bankruptcy is discharged, in most cases the individual is released from the
bankruptcy restrictions and is not obliged to pay any debt which they owed
before the bankruptcy. The slate is wiped clean. Discharge also removes future
debts which the bankrupt was going to owe at the date of the presentation of
the petition, and contingent debts which they might have owed if certain other
events occurred. It also includes potential claims which could have been brought
before the bankruptcy order, but were not.
However, the discharge does not release the bankrupt from:
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