Personal insolvency for dispute resolution practitioners: bankruptcy
Personal insolvency for dispute resolution practitioners: bankruptcy

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Personal insolvency for dispute resolution practitioners: bankruptcy
  • What is bankruptcy?
  • The effects of bankruptcy and how long it lasts
  • How to make someone bankrupt
  • What if the debtor disputes debt?
  • What happens after the bankruptcy order is made
  • Role of trustee in bankruptcy
  • Unwinding unlawful (antecedent) transactions in bankruptcy

This Practice Note is a summary of bankruptcy and its impact on legal proceedings from a dispute resolution perspective.

What is bankruptcy?

Bankruptcy is an insolvency process for individuals. Until 6 April 2016—unlike its corporate equivalent liquidation—only the court could make an individual bankrupt. However, on 6 April 2016, the bankruptcy applications regime came into force replacing debtors' bankruptcy petitions (but not creditors' petitions). Although the change did not affect debtors' petitions presented prior to 6 April 2016, any individual who now wishes to be made bankrupt must make an online bankruptcy application which is determined by the adjudicator (an official within the Insolvency Service), and not by the court.

For further reading, see News Analysis: New bankruptcy applications regime to come into force.

The making of a bankruptcy order—whether by the court or by the adjudicator—frees the debtor from the debts they owe to their creditors (save for some statutory exceptions) and prevents unsecured creditors from commencing—or continuing with—any legal process against the bankrupt or their property. A trustee in bankruptcy (trustee) will be appointed to divide certain assets of the debtor amongst those creditors who have a valid and approved claim.

The effects of bankruptcy and how long it lasts

Following the making of the bankruptcy order, the bankrupt’s property will vest in the trustee, whose task is to