The bankrupt must not act as
a director of a company or be involved in its management
without the court's consent.
What are the powers of the trustee?
The trustee's powers are wide and
include powers to sell the bankrupt's assets, to carry
on the bankrupt's business, to bring and defend legal
proceedings, and to pay dividends to the bankrupt's creditors.
He also has wide investigatory powers. Some of the trustee's
powers can only be exercised with the agreement of the
creditors' committee (or if none the DTI or the court).
Does the trustee pay unsecured creditors
the money owed to them?
Secured and preferential creditors
are paid before unsecured creditors. Secured creditors
are those that have some form of security over a bankrupt's
property (for instance a building society where a bankrupt
has a mortgage). Secured creditors are entitled to be
repaid their debt out of the proceeds of sale of the secured
asset, in priority to other creditors.
Preferential creditors are a special
category of unsecured creditor. They include certain debts
due to employees and are paid in priority to all other
unsecured creditors.
The trustee will pay a dividend to
unsecured creditors if enough funds have been realised
from the bankrupt's assets after paying costs, secured
creditors and preferential creditors.
When all claims have been adjudicated
or provided for, the trustee will declare a dividend.
The dividend will be a percentage (pence in the pound)
of each creditor's total admitted claim, based on the
total cash available for distribution to the creditors
and the total of all creditors' claims. All unsecured
creditors are treated equally.
"The bankrupt can continue to trade after
the bankruptcy order…. Any new debts created cannot be
claimed in the bankruptcy"
How do I make a claim in the bankruptcy?
The trustee will write to all known
creditors asking them to submit a proof of debt form.
You should complete this form and return it to the trustee
within the specified time limit. You should also send
enough supporting evidence of your claim, e.g. copy statements,
invoices, correspondence etc., to allow the trustee to
decide whether or not your claim is valid. You must use
the form sent by the trustee to make your claim. The trustee
will not necessarily acknowledge receipt of your claim,
but will advise you when he has admitted your claim. Any
costs incurred by you in submitting your claim will not
be reimbursed.
If you believe that you own something
in the bankrupt's possession, you should contact the Trustee
as soon as possible with full proof of ownership. Be prepared
to identity what you are claiming. The trustee will examine
your claim carefully before deciding whether to release
the goods in question pay you for them, or otherwise.
How will the trustee adjudicate my case
The trustee will consider your proof
of debt form and any supporting information- He will compare
your claim to the bankrupt's records and any other information,
and may discuss the claim with the bankrupt. The trustee
may ask you for additional information or evidence if
he thinks you have not sufficiently proved your claim.
For example, if you have supplied goods to the bankrupt,
the trustee may ask you to provide copies of signed delivery
notes.
The trustee may agree your claim
in full, or in part, or he may reject your claim if he
does not think it is valid.
What can I do if believe the trustee has
unfairly rejected rny claim?
You should first discuss the matter
with the trustee. If you cannot reach agreement you can,
within 21 days of rejection, appeal to court. After 21
days, if you do not apply to the court, the adjudication
is final.
Does the trustee have to fulfil contracts
entered into by the bankrupt prior to his appointment?
A trustee has a general duty to maximise
the level of dividend to creditors. The trustee may decide
not to fulfil a contract if it does not benefit creditors
as a whole. If the trustee chooses not to fulfil a contract,
the other party may have an unsecured claim in the bankruptcy
for breach of contract.
Is the trustee liable for sums due under
contracts entered into by the bankrupt after the bankruptcy?
No. The bankrupt can continue to
trade after the bankruptcy order (with the conditions
noted above]. Any new debts created cannot be claimed
in the bankruptcy.
As an unsecured creditor, what information
am I entitled to?
The Official Receiver must send at
least one report to creditors after his appointment. This
will usually contain a statement of affairs completed
by the bankrupt showing details of his assets and liabilities.
The trustee has no duty to report
to creditors on the progress of the bankruptcy, until
the bankruptcy is complete or until he plans to pay a
dividend. The trustee may call meetings of creditors or
send written reports to creditors if there are any major
developments in the bankruptcy. If you would like information
on progress at any time you should contact the trustee.
You may also require the trustee
to hold a meeting of creditors if you have the support
of 10% of creditors (by value of debt].
When the bankruptcy has been completed,
the trustee will call a final meeting of creditors and
present a report on the bankruptcy.
How can I help the trustee to achieve the
best possible outcome for creditors?
The unsecured creditors can form
a creditors' committee to help the trustee (see below).
You should also tell the trustee if you believe the bankrupt
has assets, income or business interests that he has not
disclosed, or if you think you have any information that
might be useful to the trustee.
Can the unsecured creditors form a creditors'
committee?
Yes. A creditors' committee may be
appointed at a meeting of creditors and must consist of
at least three-and not more than five creditors.
The creditors' committee receives
reports from the trustee and may meet periodically. It
assists the trustee, approves his remuneration and sanctions
the exercise of certain of his powers.
Creditors' committee members are
not paid, but will receive their reasonable travelling
expenses as a cost of the bankruptcy.
How is the trustee's fee determined?
The creditors' committee (if there
is one) or the creditors agree the trustee's fee, failing
which it will be determined in accordance with the scale
laid down for Official Receivers or fixed by the court.
The fee can be fixed as a percentage of the assets realised
or distributed (or both], or by reference to:
- the time properly spent
by the trustee and his staff;
- the complexity of the case;
- any exceptional responsibility
borne by the trustee; and the effectiveness with which
the trustee carries out his duties; and
- the value and nature of
the bankrupt's assets.
The Association of Business Recovery
Professionals has prepared a separate guide explaining
insolvency office holders' remuneration, which will
be available from the person who gave you this guide.
When will the bankrupt be discharged
from bankruptcy?
The bankrupt will usually be
discharged from bankruptcy automatically after one
year.
The bankruptcy will last longer
if the debtor has been bankrupt before or if the trustee
asks the court to prolong the bankruptcy - this may
happen if the trustee thinks that the bankrupt is
not properly assisting him or is concealing assets.
Once discharged, the bankrupt
is released from his bankruptcy debts, and can begin
to trade again or be a company director without the
restrictions mentioned above.
After he has been discharged,
the bankrupt does not have any right to take back
from the trustee any property that was part of his
estate in the bankruptcy. However, if there is a surplus
after payment of all creditors in full plus interest,
then this is returned to the bankrupt. In the meantime,
the trustee will continue to hold these assets and
apply them to the bankrupt's creditors.
When does the trustee cease to act?
The trustee may continue to act
after the bankrupt has been discharged if he needs
to continue in office, for example if there are still
assets to realize or creditors' claims to be agreed.
Also, the trustee may cease to
act before the bankrupt has been discharged if he
has completed his work by that time.
What should I do if I am dissatisfied
with the trustee's handling of the case?
You should first contact the
trustee to try to resolve the problem. II you are
still not satisfied, you may be able to make an application
to court.
If you think that the trustee
is guilty of professional misconduct, you should contact
his recognized professional body (see below).
R3 is a centre of excellence
representing all those who work with under-performing
businesses in the UK. R3 does not license or discipline
insolvency practitioners; this is the responsibility
of the practitioner's recognised professional body.
The RPBs are:
- The Association of Chartered
Certified Accountants
- The Institute of Chartered
Accountants in England and Wales
- The Institute of Chartered
Accountants in Ireland
- The Institute of Chartered
Accountants of Scotland
- The Insolvency Practitioners
Association
- The Law Society
- The Law Society of Northern
Ireland (for Northern Ireland only)
- The Law Society of Scotland
