Q&As

Can a bank holding security over a bankrupt borrower’s property seek judgment against the bankrupt to then seek a charging order over another of the bankrupt’s properties?

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Published on LexisPSL on 15/11/2018

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • Can a bank holding security over a bankrupt borrower’s property seek judgment against the bankrupt to then seek a charging order over another of the bankrupt’s properties?
  • The bankruptcy estate
  • Restrictions on creditors’ actions
  • Provable debts

Can a bank holding security over a bankrupt borrower’s property seek judgment against the bankrupt to then seek a charging order over another of the bankrupt’s properties?

The bankruptcy estate

The first point to note is that the bankruptcy estate comprises all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, ie as at the date of the bankruptcy order. ‘Property’ is defined in section 436 of the Insolvency Act 1986 as including ‘money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property’.

Property which the bankrupt holds on trust for any other person is not however comprised in the estate. Property comprised in a bankrupt's estate is so comprised subject to the rights of any other person other than the bankrupt, whether as a secured creditor or otherwise, in relation to that property.

The bankruptcy estate vests in the trustee immediately on their appointment without any conveyance, assignment or transfer. Since 6 April 2017, the first trustee (usually the official receiver) is appointed at the same time that the bankruptcy order is made. Accordingly, at the time of vesting, the bankrupt no longer has any interest in assets and interests comprising the bankruptcy estate.

If the bankrupt,

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