Discharged bankrupt’s income payments order not enforceable in later bankruptcy (Azuonye v Kent (in her capacity as trustee of the bankrupt estate of the appellant))

Discharged bankrupt’s income payments order not enforceable in later bankruptcy (Azuonye v Kent (in her capacity as trustee of the bankrupt estate of the appellant))

Barnaby Hope, barrister at Selborne Chambers, examines the Court of Appeal’s decision in Azuonye v Kent (in her capacity as trustee of the bankrupt estate of the appellant) that after a debtor was discharged from bankruptcy but later adjudged bankrupt for a second time, the debtor’s liability for future payments under an income payments order (IPO) made in the earlier bankruptcy was a provable debt in the later bankruptcy and so was not enforceable by the trustee in the earlier bankruptcy.

Azuonye v Kent (in her capacity as trustee of the bankrupt estate of the appellant) [2019] EWCA Civ 1289

What are the practical implications of the judgment?

This decision in Azuonye v Kent (in her capacity as trustee of the bankrupt estate of the appellant) covers a relatively narrow issue. Given that Lewison LJ noted, when granting the appellant permission to appeal, that the scope of a provable debt was an ‘issue of general importance’, there may have been an opportunity for the Court of Appeal to develop this concept generally, but it did not. This was understandable, given that Re Nortel GmbH (in administration) [2013] UKSC 52, [2013] 4 All ER 887 is very clear in its application.

However, trustees in bankruptcy, bankrupts and former bankrupts can now be clear that an IPO will not survive a later bankruptcy. Any sums due under it will be a provable debt in the later bankruptcy (for the benefit of the earlier bankruptcy creditors), but the earlier trustee cannot continue to collect payments from the bankrupt or a third party. If bankrupts are discharged from the later bankruptcy, they will be released from the obligations under the IPO.

As David Richards LJ noted in closing, however, there are measures to prevent this from being abused (at para [42]). If bankrupts wrongly obtain a bankruptcy on their own application, it can be annulled. The later trustee can apply for a fresh IPO. And, in any event, any property

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About the author:

Zahra started working as a paralegal at Lexis Nexis in Banking and Insolvency teams in April 2019. Zahra graduated with a 2.1 honours in a BA French and Spanish, completed the GDL at BPP University and is seeking some experience before commencing the LPC. She has undertaken voluntary work for law firms in London, Argentina and Colombia.