21.6 Claim of earlier
On the making of a bankruptcy order where the bankrupt is not discharged from earlier bankruptcy proceedings, the trustee in the last preceding bankruptcy ("earlier bankruptcy") is given the right of proof in the later bankruptcy in respect of:-
the unsatisfied balance of the provable debts in the earlier bankruptcy,
any interest payable on that balance, and
any unpaid expenses in the earlier bankruptcy.
Where the bankrupt has been discharged from the earlier bankruptcy a claim, as detailed above, may not be made. (See paragraph 21.14)
Notes: trustee [s335(5)]
21.7 Postponement of claim
The claim(s) of the trustee in the earlier bankruptcy only rank(s) for payment after all other proved debts in the later bankruptcy have been paid in full with interest.
Note: [s335(6)]
21.8EA Transfer of property
Any assets acquired by the bankrupt after the date of the original bankruptcy order and claimed by the trustee in the earlier bankruptcy or any monies due under an income payments agreement or order but not distributed before notice of a subsequent petition is received by him are to be transferred to the later bankruptcy (see paragraph 21.13, but also paragraph 21.21). Section 334(2) is silent as to who is responsible for serving the notice of a subsequent petition but it is generally assumed that it is the responsibility of the new petitioning creditor. Where the official receiver becomes aware that a bankrupt is undischarged from prior bankruptcy proceedings he should inform the trustee in those proceedings of the making of the bankruptcy order to ensure that any undistributed assets are transferred to the later proceedings. The official receiver should also ensure that the claim/potential claim of the trustee in the earlier proceedings is noted on the file.
Notes: [s334(3) and 335(1)] [Form 6.78]
21.9 Deceased insolvents [Para. 26,
These provisions also apply where an insolvency administration order is made under the Administration of Insolvent Estates of Deceased Persons Order 1986 but for the sake of convenience references in this chapter are to a bankruptcy order only.
Notes: Part II, Schedule 1 AEDIO]
21.10EA After-acquired property and income payments orders
After-acquired property does not vest automatically in the trustee but he may claim any such property under section 307 (see chapter 31). Where, on receiving notice of a later bankruptcy petition against the bankrupt, the trustee in the earlier bankruptcy has any of the following property, he must hold it for the trustee in the later bankruptcy:-
after-acquired property claimed;
money paid under an income payments agreement or order.
any money representing the proceeds of sale of after-acquired property;
(less likely) any property representing the application of money received under an income payments agreement or order.
21.11 Expenses of first trustee
Any such money or property will then form part of the estate in the later bankruptcy but subject to a first charge in favour of the earlier trustee for any expenses he may have incurred in dealing with those assets.
Notes: [s335(3); R6.228]
21.12 Fees, etc
When the official receiver is trustee in the earlier bankruptcy, he must ensure that the appropriate fees and remuneration under the Fees Order and the Regulations have been charged and such amounts should, before accounting to the subsequent trustee, be deducted from the proceeds of any property to be transferred.
21.13EA Procedure for transfer of property; court ratification
Where a trustee has received notice of a subsequent bankruptcy petition against the bankrupt, he should hold and protect any property as described in paragraph 21.10EA until the subsequent petition is disposed of. If a later bankruptcy follows, any distribution of property to which section 334(3) relates (as described in paragraph 21.10EA) made by the trustee after notice of the petition is void unless made with the consent of, or ratified by, the court in which the earlier proceedings were brought. The court may, for example, ratify a distribution where after-acquired property or proceeds from an income payments agreement or order were received by the original trustee before he received notice of a subsequent bankruptcy petition and he was about to pay a dividend, having already complied with all of the necessary requirements.
Notes: [Form 6.78] [s334(2)]
21.14 Proofs of debt [R6.96(5)]
The original trustee proves in the later bankruptcy in respect of the unsatisfied balance of the provable debts in the earlier bankruptcy, interest payable on that balance and any unpaid expenses including unassessed expenses such as petition costs.There is a special prescribed form for this proof. As with any proof of debt, the amount initially claimed may later be varied if circumstances change, e.g. assets realised and distributed reduce the outstanding balance. Individual creditors in the earlier bankruptcy are not creditors individually in the subsequent bankruptcy for any debt relating to the earlier proceedings (except where those debts are not released on discharge).
Notes: [Form 6.38] [s281(3)(4)(5)]
21.15 Partnerships
If the earlier bankruptcy involved the bankrupt’s membership of a partnership, the proof to be made for the unsatisfied balance of the debts will comprise the balances due in the separate estate of the bankrupt partner and in the joint estate of the partnership (Re Moss, ex parte Everitt (1923) B&CR 135). Although there is no settled case law on the subject, it is considered that if the earlier bankruptcy order was made under the Insolvent Partnerships Order 1986 or 1994, any dividend received on that proof must be applied firstly in payment of the liabilities in the separate estate in the preceding bankruptcy, and any surplus arising on a payment in full will then be transferred to the joint estate. For guidance regarding distribution under the Insolvent Partnerships Order 1994 (which is also generally applicable to cases brought under the Insolvent Partnerships Order 1986), see paragraphs 53.86 to 53.92 inclusive.
21.16 Dealing with claims in earlier bankruptcy
To minimise the need to amend a proof of debt as a consequence of further debts being discovered in the earlier bankruptcy, where he is the trustee in that bankruptcy, the official receiver should ensure, so far as possible, that claims in that bankruptcy have been established before he lodges the proof in the later bankruptcy. Where there are claims the amounts of which are in doubt, this can probably best be dealt with by issuing a notice to all creditors in the earlier bankruptcy in respect of whose claims further information is required. The notice should indicate the circumstances and request the early notification of claims. It is not necessary to obtain proofs of debt for this purpose. But in undertaking this work official receivers should remember that a distribution will only be made in respect of an earlier bankruptcy after all of the proved debts in the later bankruptcy have been paid in full with interest. The gathering of further information on claims in an earlier bankruptcy to enable the official receiver to prove in a later bankruptcy should not be undertaken as an academic exercise but only when there is a real possibility that a distribution on such a proof will be made. Wherever possible, existing, readily available information should be used for this purpose.
21.17 Further claims
Subject to the comments made above, if a further provable debt is notified in the earlier bankruptcy after the trustee has proved for the unsatisfied balance in the later bankruptcy, the trustee in the earlier bankruptcy should notify the later trustee and amend his proof.
Notes: [R6.106]
21.18 Distribution of funds received by first trustee
Funds received by way of dividend from later proceedings must be distributed among all creditors who have proved in the earlier bankruptcy, whether or not their claims were included in the proof lodged in the later bankruptcy by the original trustee. If the funds have already been distributed when a late claim is made, the usual rule applies and the distribution will not be disturbed. The additional claim will only be paid if and when further funds are received.
Notes: [R11.8]
21.19 Proposal for voluntary arrangement
Where a proposal for a voluntary arrangement under Part VIII of the Act (see chapters 20 and 57) is made in the later bankruptcy, the official receiver, if he is trustee in either or both bankruptcies, should ensure that it deals specifically with the right of proof/claim of the trustee in the earlier bankruptcy and with the disposal of any undistributed after-acquired property or income in the hands of the second trustee or the supervisor (if the proposal is accepted).
21.20 Protection of rights of creditors
Although the claim of the earlier trustee in the latter bankruptcy is postponed, if that latter bankruptcy continues, the object of the voluntary arrangement will almost certainly be the subsequent annulment of the later bankruptcy order. Where the official receiver is trustee in the earlier bankruptcy, he should attempt to make it a condition of his agreement to vote for the proposal for an arrangement that either undistributed, after-acquired property remains in the earlier bankruptcy or that the creditors in the earlier bankruptcy are paid the same proportion of their claims as those in the later bankruptcy or that the proposal contains some other provision to achieve something for the creditors in the earlier bankruptcy. Creditors have a reasonable expectation that agreement to a voluntary arrangement will produce a better result for them than the continuation of a bankruptcy.
21.21 Payments from conditional discharge in previous bankruptcy
Where, in a previous bankruptcy, the bankrupt has been discharged under an order subject to conditions with regard to income or property and those conditions have not been satisfied at the time of the later bankruptcy, payments received by the first trustee under the order will be retained in those proceedings, including amounts yet to be distributed, unless the order of discharge is subsequently rescinded. Where the order of discharge is rescinded on the application of the first trustee due to the bankrupt’s failure to comply with the conditions upon which the order was made or where the making of the second/subsequent bankruptcy order prevents the bankrupt from complying with those conditions, any funds held will be transferred to the later bankruptcy and the first trustee will submit a claim in the later proceedings (see paragraphs 21.7, 21.8EA and 21.13EA)
Notes: [s375(1)]
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