Suspension of discharge

April 2004

Part 4 has been amended to include the bankruptcy provisions of the Enterprise Act 2002 which came into force on 1 April 2004. The following guidance should be applied in all cases where the bankruptcy order was made on or after 1 April 2004.

In cases where the bankruptcy order was made before 1 April 2004 this part should be read in conjunction with Annex 1

 

22.26 Suspension of discharge (Amended June 2007)

Where a bankrupt has failed or is failing to comply with the obligations imposed on him/her by the Act or Rules, particularly where there are any circumstances of non-attendance, obstruction, misinformation failure to provide required information, delay or other serious misbehaviour on the part of the bankrupt, the official receiver or trustee should consider applying to the court for the running of the automatic discharge period to be suspended, thus extending the date of discharge beyond the normal period, pending the bankrupt’s full co-operation.

Note: [s279(3)]

An application for suspension of discharge may be made by the official receiver or the insolvency practitioner trustee. The court shall fix a date and venue for the hearing and give notice to the official receiver, the trustee who is not the official receiver and the bankrupt.

Note: [R6.215(3)] 

 

22.26A Effect of suspension of discharge on the limitation period

When considering whether or not to apply for a suspension of discharge, the position of creditors with claims in bankruptcy which are provable, but which are not released upon discharge, may need to be considered by the official receiver.

Discharge does not release the bankrupt from his/her liability to repay certain creditors, such as those with personal injury claims against the bankrupt, or the appropriate benefits provider, where benefit overpayments were made as a result of benefit fraud on the part of the bankrupt (see Chapter 40, paragraph 40.178).

Upon the making of a bankruptcy order section 285 of the Insolvency Act 1986 imposes restrictions on creditors with provable claims, from taking recovery action against the bankrupt without the permission of the court. These creditors are therefore usually restricted from continuing any action to recover sums due until after discharge from bankruptcy has taken place.

However, in the case of Anglo Manx Group Ltd v Aitken [2002] BPIR 215, it was held that the limitation period on an action for a debt which is not discharged under section 281, continues to run throughout the bankruptcy period. The overall effect of this judgment being, that the actions of the official receiver in obtaining a suspension of discharge may ultimately prevent creditors with claims in bankruptcy which are provable, but which are not released upon discharge, from being able to recover sums due to them (see Chapter 40, paragraph 40.11).

Note: [s281 and s285(3)]

 

22.27 Report to court by OR

(Amended May 2011)

If the official receiver makes an application for suspension of discharge, it should be accompanied by evidence in support setting out the reasons why it appears that such an order should be made [R6.215(2)]. Where there is an insolvency practitioner acting as trustee the official receiver should seek additional information and evidence from the trustee in support of the application.

Copies of the official receiver's report must be sent to any insolvency practitioner trustee appointed and to the bankrupt to reach them at least 21 days before the hearing [R6.215(2)].  A template letter is available on ISCIS ‘Docs’ tab for serving the report on the bankrupt [LCRTB], and any trustee in office [LCRTR].  A Certificate of Service (Court Form N215) will need to be completed for each of the parties who have been sent a copy of the official receiver’s report.  Partially completed versions of this form are available through ISCIS ‘Docs’ tab as form SODCERT.

The insolvency practitioner trustee may attend the hearing and make representations in person.

 

22.27A Where an IP trustee is in office

(Added December 2011)

It has been agreed with the Association of Business Recovery Professionals (R3) that from 1 January 2012 the official receiver will, in certain circumstances, apply to the court for the suspension of the bankrupt’s automatic discharge at the request of an insolvency practitioner (IP) trustee. 

Provided that the official receiver is in agreement that an order suspending the bankrupt’s automatic discharge be made the official receiver will make application where there are no available funds in the insolvent estate and the IP trustee has taken all other appropriate steps to seek the bankrupt’s compliance.

For the official receiver to make the application to court the IP trustee will need to: 

  • prepare a witness statement that complies with the requirements of rule 6.21(2) of the Insolvency Rules 1986 (as amended) setting out the evidence in support of an application to submit the automatic discharge of the bankrupt; 
  • submit the signed and dated witness statement to the official receiver (OR) relevant to the case at least one calendar month before the date of the bankrupt’s automatic discharge.

Within three business days of the witness statement being received the official receiver will respond to the IP trustee and confirm whether or not he/she agrees that there are sufficient grounds to make the application.  If the official receiver does not agree that there are sufficient grounds then the response should summarise why he/she is not in agreement.

Where the official receiver is in agreement that an order suspending the bankrupt’s automatic discharge should be sought  the official receiver will make application to court, attend court and present the application.  The IP (or an appropriate member of the IP’s staff) will attend court to give evidence if so required by the official receiver.

 

22.28 Report to court by IP trustee

Where the insolvency practitioner trustee is making the application he/she may seek supporting information and evidence from the official receiver.

The insolvency practitioner trustee will send a copy of his/her report to the official receiver to reach him/her at least 21 days before the hearing. The official receiver will consider whether there are any additional matters that should be reported to the court. Where there are such matters the official receiver should attend the hearing.

Note: [R6.215(2) and (5)]

 

22.29 Bankrupt's notice denying or disputing OR/trustee's evidence (amended September 2010)

The bankrupt may file a notice in court specifying any statements in the official receiver or insolvency practitioner trustee's evidence which he/she intends to deny or dispute at the hearing.

In cases where the bankruptcy petition was presented before 6 April 2010 the bankrupt must file such notice no later than 7 days before the hearing and must send copies of it to the official receiver and any insolvency practitioner trustee no later than 4 days before the hearing.

In cases where the petition was presented on or after 6 April 2010 the bankrupt must file such notice no later than 5 business days before the hearing and must send copies of it to the official receiver and any insolvency practitioner trustee no later than 4 business days before the hearing

Note: [R6.215(6) and (7)]

 

22.30 Only conduct in the proceedings relevant

Consideration of an application for suspension should only be influenced by the bankrupt’s adverse conduct in the proceedings or with regard to his/her statutory duty to co-operate with the official receiver or trustee e.g. to deliver up property, notify after-acquired property, answer questions, particularly at a public examination etc or to provide information or to supply co-operation. Certain such matters may also represent an offence for which a prosecution report may be considered (e.g. section 358). However, matters of misconduct which do not directly involve failure to co-operate with the office-holder, such as credit offences under section 360, should not form the basis of an application for the suspension of the running of the discharge period. Such matters together with adverse matters arising before the bankruptcy, should only be considered with a view to the possible institution of criminal proceedings.

Note: [s279(3)] [s291 and s333] [s307]

 

22.31 Application is made on adjournment of public examination (amended September 2010)

The official receiver is not required to submit a report to court when application to suspend discharge is made orally on a public examination being adjourned, either because of the bankrupt’s non-attendance or on other grounds, such as blatant non co-operation, either at the hearing or in the proceedings generally.

In cases where the bankruptcy petition was presented before 6 April 2010 such an application can only be made where a public examination is adjourned generally. For cases where the bankruptcy petition was presented on or after 6 April 2010, an application to suspend the bankrupt’s discharge can be made following any adjournment of a public examination and not just when it is adjourned generally.

The bankrupt should be warned in the letter sent to him/her reminding him/her about the public examination (see chapter 14) that an application for the suspension of his/her discharge may be made if he/she fails to attend the examination.

Note: [R6.176(4) and 6.215(1)] [form PEN]

 

22.32 Period of suspension

Usually when the official receiver is making the application he/she will wish to seek suspension of the running of the discharge period for an indeterminate period, until the bankrupt fulfils certain stated conditions, such as the submission of accounts. Where a bankrupt’s conduct has been unsatisfactory but the official receiver forms the opinion that he/she is genuinely not, and is never likely to be, in a position to provide proper explanations, accounts, etc, the court may feel that a fixed term of suspension is more appropriate. A fixed term may also be appropriate where the bankrupt’s non co-operation has caused a considerable amount of extra work for the official receiver (e.g. deliberately misleading information or non-disclosure of assets), even though subsequent inquiries may have led to the discovery of all relevant facts, so that suspension until proper disclosure by the bankrupt is not a viable proposition.

 

22.33 Wording of order

The suspension order should either specify a period of time for which the running of the discharge period will be suspended or one or more conditions to be fulfilled before the running of the discharge period can be resumed. The undischarged bankrupt should not be put into the position of not knowing what he has to do to reinstate the running of his discharge period, if the suspension is not for a determined period of time.

Note: [s279(3)]

 

22.34 Hearing (amended September 2010)

With effect from 6 April 2010 the Rules state that all applications to court must be heard in open court unless the court directs otherwise. This brings insolvency proceedings in line with the Civil Procedure Rules (CPR) which also state that  the requirement for a hearing to be in public does not require the court to make special arrangements for accommodating members of the public. The CPR Part 39 provide guidance as to the circumstances when a court may consider that a hearing should be held in private. See also Technical Manual Chapter 19.

[R 7.6A, CPR 39.2]

 

22.35 Copies of order (amended June 2007)

If the court makes an order suspending discharge it must send copies to the official receiver, any trustee who is not the official receiver and the bankrupt.

There have been some cases where the E-IIR has not been updated following the suspension of discharge where an insolvency practitioner has made the application but the official receiver has not been notified of either the hearing or the order being made. Although the trustee has made the application, rule 6.215(3) provides that is for the court, not the trustee, to give notice of the hearing to the official receiver.  Where the official receiver has not received notification of the hearing and/or order the matter should be taken up with the relevant court manager.

Note: [R6.215(8);Form DSO]

 

22.36 Report to court of bankrupt’s compliance

(Amended February 2012)

As soon as the official receiver has formed the opinion that the bankrupt has complied with his/her obligations, he/she should report that opinion and the date he/she formed it to the court.  The official receiver may also wish to provide to the court a draft order lifting the suspension of discharge.  The official receiver should evidence the sending of the report to the court by completing a Certificate of Service on form N215 (‘Certserv’, ISCIS ‘Docs’ tab).  If the court discharges the order it will issue to the bankrupt a certificate to that effect, indicating the date when the discharge period begins to run again. The court will send a copy of the discharge certificate to the bankrupt, official receiver and to any insolvency practitioner trustee.

The submission of a report by the official receiver in cases where the discharge has been suspended under Rule 6.176(4) will avoid the need for further attendance at court to conclude the Public Examination. See also paragraph 22.31.

Note: [R6.216(7)Form DOLS and Form 6.74 - certificate that order suspending discharge has been lifted]

 

22.37 Discharge of suspension order

Where an order suspending a discharge period is made and the official receiver has not asked for the suspension of discharge to be lifted, the bankrupt can apply to the court to discharge the order. When the court fixes a hearing date for such an application the bankrupt must give at least 28 days notice of it to the official receiver and any trustee appointed, accompanied by a copy of the application.

Note: [R6.216(1) and R6.216(2)]

 

22.38 Official receiver or trustee's evidence

The official receiver and any insolvency practitioner trustee may appear on the bankrupt’s application. If they wish to they may, either in addition to or instead of appearing, file in court evidence in support of any matters which they consider ought to be drawn to the court’s attention. Where there is any continuing lack of co-operation or misconduct on the part of the bankrupt, the official receiver or trustee should file a report and attend the hearing. If the discharge was suspended pending the fulfillment of certain conditions, the court will expect the official receiver or trustee to report as to whether those conditions have been fulfilled.

Note: [R6.216(3)] [R6.216(4)]

 

22.39 Copies of report

(Amended February 2012)

If a report is filed, copies must be sent by the official receiver to the bankrupt and to any insolvency practitioner trustee not later than 14 days before the hearing. The official receiver should evidence the sending of the report to the bankrupt and any Insolvency Practitioner Trustee by completing a Certificate of Service on form N215 (‘Certserv’, ISCIS ‘Docs’ tab), once completed a copy of the Certificate of Service should be filed at court. If the bankrupt intends to dispute any statements in the report he/she must, not later than 7 days (in cases where the bankruptcy petition was presented before 6 April 2010) or 5 business days (in cases where the petition was presented on or after 6 April 2010) before the hearing, file in court a notice specifying any statements in the official receiver or trustee's report which he/she intends to deny or dispute.

The bankrupt must send copies of the notice not less than 4 days (or 4 “business days” where the petition was presented on or after 6 April 2010) before the date of the hearing to the official receiver and to any insolvency practitioner trustee.

Note: [R6.216(5); forms LCRTB and LCRTR] [R6.216(6)]

 

22.40 Certificate of order

If the court discharges the order it will issue a certificate to that effect, indicating the date when the discharge period begins to run again. The court will send a copy of the discharge certificate to the bankrupt, official receiver and to any insolvency practitioner trustee.

Note: [R6.216(7); Forms DOLS and Form 6.74 - certificate that order suspending discharge has been lifted]

 

22.41 Period for making application for bankruptcy restrictions order

Where an order has been made suspending the bankrupt's discharge, the period (of one year commencing with the bankruptcy order) where the official receiver may apply for a bankruptcy restrictions order ceases to run.

When an order suspending the bankrupt's discharge is lifted, the official receiver should consider whether to make application for a bankruptcy restrictions order or accept a bankruptcy restrictions undertaking.

Note: [IA86 Sch 4A]

 

[Back to Part 3 - Fees] [On to Part 5 - Post - Discharge]