The following Property guidance note provides comprehensive and up to date legal information covering:

  • Bankruptcy
  • The process of seeking a bankruptcy order
  • What happens after the bankruptcy order is made?
  • Appointment of trustee
  • Effect of appointment
  • Trustee's powers
  • How long does bankruptcy last for?

Bankruptcy is an insolvency process for individuals, which commences on the day the bankruptcy order is made.

Until 6 April 2016, unlike its corporate equivalent liquidation, only the court could make an individual bankrupt. However, on 6 April 2016, the new bankruptcy applications regime came into force replacing debtors' bankruptcy petitions (but not creditors' petitions), meaning that any individual who wishes to be made bankrupt must make a bankruptcy application which is determined by an adjudicator, and not by the court.

The making of a bankruptcy order—whether by the court or by the adjudicator—will free the debtor from the debts due to their creditors (and will prevent unsecured creditors from commencing, or continuing with, any legal process against the bankrupt or their property). In return, a trustee in bankruptcy (trustee) is appointed in order to divide certain assets of the debtor among the creditors (who have a valid and approved claim in the bankruptcy).

The main legislation relating to bankruptcy is to be found in sections 264 to 371 and Schedule 5 of the Insolvency Act 1986 (IA 1986), Part IX, and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024.

The process of seeking a bankruptcy order

As with liquidation, the effect of bankruptcy is to realise the assets of the bankrupt and distribute the proceeds in accordance with the