Q&As

Where a bankrupt disposes of property comprised in the bankruptcy estate, does the trustee in bankruptcy have a claim over the proceeds of sale?

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Published on LexisPSL on 19/04/2016

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

  • Where a bankrupt disposes of property comprised in the bankruptcy estate, does the trustee in bankruptcy have a claim over the proceeds of sale?

Where a bankrupt disposes of property comprised in the bankruptcy estate, does the trustee in bankruptcy have a claim over the proceeds of sale?

For the purposes of this Q&A we have assumed that the bankrupt owned the property at the time the bankruptcy order was made, and that there were no complicating factors regarding ownership (ie that it was held on trust or was subject to any hire purchase or other finance agreement).

Under section 283 of the Insolvency Act 1986 (IA 1986), the assets that comprise the bankruptcy estate are those that belonged to or were vested in the bankrupt at the time the bankruptcy order was made. Accordingly, the property would have formed part of the bankruptcy estate, unless it was excluded under IA 1986, s 283(2) (for example, because the car was necessary for the bankrupt’s employment, business or vocation). We assume that the property was not so excluded.

Under IA 1986, s 306, upon his appointment, the property would have automatically vested in the trustee in bankruptcy (trustee). Accordingly, from that moment in time, the trustee would have had title to the property—even if not in possession of it—and any dealing with, or disposal of it, would need to have been done by the trustee or with the trustee’s consent. That position does not change simply because the bankrupt is discharged under

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