Protecting the estate, initial notices and actions

October  2010

Part 4

Protecting the estate, initial notices and actions 

24.28  Duty of the official receiver to protect the estate

On the making of a bankruptcy order the official receiver should take such steps as he/she thinks fit to protect any property which may be claimed for the estate by the trustee [Note 1].


24.29 Incurring expenditure

The official receiver is not required to do anything which involves incurring expenditure unless directed by the Secretary of State [Note 2]. The Service’s general direction is that the official receiver should take all steps thought to be necessary to protect the estate, which includes obtaining insurance cover on the bankrupt’s assets where appropriate, see paragraphs 24.31 and 24.32.


24.30 Identifying the bankrupt’s estate

The official receiver, after reviewing the information provided by the bankrupt in the statement of affairs, during an inspection and/or during an interview, should have a reasonable idea of what assets vest in the estate and their whereabouts. The official receiver will need to take whatever actions are necessary to protect the estate for the benefit of the creditors.


24.31 Insurance cover

(Amended February 2014)

In appropriate cases the bankrupt should be asked to provide sight, or a copy, of all current insurance policies held by him/her. Where the insurance policies are not available the insurers should be contacted to ensure that adequate cover exists. Once the official receiver has confirmed that the bankrupt’s assets are insured he/she should decide whether to continue with the bankrupt’s policies or to effect his/her own insurance cover. The official receiver should be satisfied that the bankrupt’s insurance meets his/her requirements in terms of the nature and extent of the cover, that the insurance company is prepared to continue the cover and that there are no clauses that void the policy upon the insured being declared bankrupt (see Chapter 49, part 2 for further guidance). The official receiver, in appropriate trading cases, should ensure that the bankrupt’s policy provides adequate protection in respect of public liability (see paragraph 24.56). In all other cases the official receiver should arrange his/her own insurance cover on the bankrupt’s home, stock or other assets (see Chapter 49, part 1 for further details). The official receiver should make arrangements to review the need for continued insurance. Once it is no longer required insurance should be cancelled as per the guidance in Paragraph 49.27B.


24.32  High insurance premiums

If the risk to the bankrupt’s assets is such as to result in a high premium the official receiver should discuss the matter with Technical Section before obtaining the insurance cover.


24.33 Bank, building society and similar accounts

The official receiver should issue a notice, BANK1 form, in respect of each bank, building society or similar account as soon as possible after becoming aware of the account. Any credit balance should be held to the official receiver’s order pending the appointment of the trustee unless the credit balance is considered to be “at risk” [Note 3]. The official receiver may consider that funds might be at risk where a spouse continues to hold a bank card on the bankrupt’s account or where monies, other than wages, are payable to the bankrupt.


24.34 Freehold property

The official receiver should issue a MP2 to all mortgagees and charge-holders of freehold property to protect his/her interest. The official receiver should make enquiries to determine the bankrupt’s interest in the property, whether it is likely to be treated as a family home (see Part 7) and whether it is in the process of being sold or at risk (see Part 8).


24.35 Life, endowment and similar policies

The official receiver should issue a NTASS form to the relevant company as soon as possible after becoming aware of the policy. The official receiver should ascertain the surrender value of the policy and ensure that the funds are held to his/her order pending the appointment of the trustee unless the policy is thought to be “at risk”. A policy may be considered at risk where the policy document had gone astray or was not produced. The official receiver should surrender any insurance policy he/she considers at risk [Note 4].


24.36 Perishable goods

The official receiver may sell or otherwise dispose of any perishable goods [Note 5]. Perishable goods are usually foodstuffs encountered at a greengrocers, fishmongers, restaurant, etc and may include substances which should be treated as controlled or hazardous waste (see paragraph 24.65 and Chapter 82 for further information). Prompt action by the official receiver or his/her agent to realise the assets will increase the return to the bankrupt’s estate (see also paragraph 24.43).


24.37 Goods likely to fall in value

The official receiver also has the power to sell or dispose of any other goods the value of which is likely to diminish if not disposed of [Note 6]. The type of property covered is much wider than those covered in paragraph 24.36.The type of goods which may diminish in value include seasonal goods such as Christmas cards, memorabilia related to specific events, for example a specific Wimbledon singles final, non-perishable goods with a sell by date, for example phone cards, etc. The official receiver may also sell or dispose of goods where the costs of removal, storage and/or insurance would significantly reduce the return to the estate.


24.38 Distress

A landlord, under the provisions of the Insolvency Act 1986, may levy distress upon the goods and effects of an undischarged bankrupt for an amount equal to six months arrears of rent in any period prior to the commencement of the bankruptcy [Note 7]. In addition HM Revenue and Customs, Local Authorities, Magistrates, Local parking Authorities and the Child Support Agency have a statutory right to levy distress. Part 1 of Chapter 9 provides further guidance on distress and how the official receiver should deal with it.


24.39 Where distress has been levied

Where distress has been levied, which includes the distraining creditor obtaining walking possession (see paragraphs 9.17 and 9.18) the official receiver should obtain full details, see paragraph 9.25, of the distraint and the goods seized. The official receiver should give notice (NORD1) to the distraining creditor and any bailiff acting on his/her behalf.


24.40 Notice of intention to levy distress

Where the official receiver has been formally notified of an intention to levy distress he/she should not remove or sell any property even though this would be likely to result in a greater return to the estate.


24.41 “Three month rule”

If distress was levied by any person within three months prior to the bankruptcy order then the goods or their sale proceeds are charged for the benefit of preferential creditors to the extent that the bankrupt’s other assets are insufficient to meet the preferential creditors claims [Note 8]. If the bankrupt’s assets are insufficient to meet the preferential creditors’ claims the official receiver should write to the distraining creditor and/or his/her bailiff asking them to hold the goods or proceeds to the trustee’s order.


24.42 No notification of distress

Where no formal notification of distress has been served, the official receiver should arrange for the removal and storage or sale of any of any relevant assets if he/she considers such action to be in the best interests of the creditors generally.


24.43 Perishable goods and distress

A landlord is not allowed to distrain on certain items which are subject to absolute or qualified privilege, see paragraph 9.7 for further details. Perishable goods are absolutely privileged from distress and as a result should be disposed of by the official receiver even if he/she is aware that a landlord is intending to levy distress.


24.44 Execution

Execution is the seizure of goods to enforce a civil court judgment and is levied by a High Court enforcement officer or the county court bailiff (see paragraphs 9.55 to 9.57 for further details). The official receiver should confirm whether execution has been levied on any of the bankrupt’s property. If so, he/she should establish whether the execution is valid and obtain additional information as per paragraph 9.72.


24.45 Execution levied

The official receiver should then issue notice to the relevant court officer, see paragraph 9.73 for the High Court and paragraph 9.74 for the county court [Note 9]. The notice can now be served by electronic means to any authorised person [Note 10]. If the execution has not been completed (see paragraph 9.68) the relevant court officer should be asked to hold the property to the trustee’s order. The official receiver should make no attempt to remove any property subject to walking possession until the relevant court officer has released the property to him/her (paragraph 9.71). A detailed explanation of what the official receiver should do when execution has been levied can be found in part 2 of Chapter 9. The costs of execution should be dealt with in accordance with paragraphs 9.87 and 9.88.


24.46 Goods at risk

Assets may also be at risk at a trading address where third parties have access to the premises, for example a shop with an entrance to a second floor flat. The official receiver will be unable to protect these assets and should arrange for them to be removed and stored or sold (see paragraph 24.37).


24.47 Third party property

When the official receiver becomes aware that the bankrupt holds third party property he/she should contact the owners to make arrangements for the collection of their property. The official receiver should obtain proof of ownership before the goods are released. A receipt evidencing return of the goods should be obtained by the official receiver.


24.48 Seizure of third party property

The official receiver is entitled to seize third party property if he/she believes that he/she is entitled to the property. The official receiver will not be liable to any person in respect of any resulting loss or damage unless such damage or loss is caused by his/her negligence or his/her belief of entitlement was unreasonable [Note 11].


24.49 Sale of third party property

The official receiver is entitled to sell third party property seized in accordance with paragraph 24.48. The official receiver on being provided with satisfactory proof of ownership should return the sale proceeds after the deduction of any agent’s costs and other expenses incurred in connection with the seizure or disposal [Note 12].


24.50 Return of seized third party property

If the goods are returned to the owner prior to sale the official receiver has a  lien on the property, or the proceeds of sale, for such expenses as were incurred in connection with the seizure [Note 13].


24.51 Exempt property

Prior to dealing with the removal and storage or sale of any assets the official receiver should ensure that he/she identifies any exempt property, as it is not part of the bankrupt’s estate [Note 14]. See Paragraph 30.4 for a definition of exempt property. Exempt property may include amongst other items, motor vehicles, tools of the trade and household furniture. In certain circumstances the trustee can claim exempt property as part of the bankrupt’s estate if a suitable replacement is provided. For more information about exempt property generally see Chapter 30.


24.52  Dealing with exempt property

The action needed to be taken by the official receiver as receiver and manger in dealing with motor vehicles is explained in paragraphs 31.2.25, 31.2.25a and 31.2.28. If the official receiver as receiver and manager is satisfied that there will be a net value by replacing any other  “necessary” item he/she should follow the procedures in paragraphs 30.50 and 30.51.   


24.53 Book Debts

In all appropriate cases the official receiver should identify the bankrupt’s trade debtors. The official receiver should write to the debtors and ask them to hold any monies to his/her order, for further details see paragraph 24.59.


[Back to Part 3 - Initial actions on the making of a bankruptcy order] [Onto Part 5 - Trading bankrupt]