Q&As

Can a person who is bankrupt issue a claim against a company?

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Published on LexisPSL on 19/05/2017

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

  • Can a person who is bankrupt issue a claim against a company?

Can a person who is bankrupt issue a claim against a company?

In answering this Q&A, we assume you are referring to a claim that has not yet been issued at court.

The presentation of a bankruptcy petition, by a creditor or the making of a bankruptcy application by the debtor themselves has no legal effect on ongoing proceedings in which the debtor is the claimant.

However, once a debtor has been declared bankrupt, most causes of action the bankrupt had an interest in will form part of the bankruptcy estate and will vest in the trustee pursuant to section 306 of the Insolvency Act 1986 immediately upon the trustee’s appointment. As a result, in those cases it will be the trustee—rather than the bankrupt—who will have standing to commence or continue with the claim. Whether the trustee commences or continues with the claim will depend on whether or not that is in the best interests of the bankruptcy creditors. As to those causes of action which have vested in the trustee, it is not possible for the bankrupt to commence or continue with the action alone. If a claim has already been commenced, the action will be stayed unless

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