EARLY DISCHARGE PROCESS
Part 2 provides guidance on the early discharge process introduced with the bankruptcy provisions of the Enterprise Act 2002 which came into force on 1 April 2004.
The Enterprise and Regulatory Reform Act 2013 repealed the early discharge provisions introduced by the Enterprise Act 2002. The repeal of the early discharge provisions came into force on 1 October 2013; accordingly early discharge will not apply in any case where the bankruptcy order is made on or after 1 October 2013.
In cases where the bankruptcy order was made before 1 April 2004 refer to Annex 1
If before the end of the period of one year after the bankruptcy order the official receiver files with the court a notice stating that investigation of the conduct and affairs of the bankrupt under section 289 is unnecessary or concluded, the bankrupt is discharged from bankruptcy when the notice is filed. This process is referred to as an early discharge. [note 1]
The early discharge process may be applied in cases where an income review has been completed, (see paragraph 22.13EA), any investigation is concluded, and where all asset matters have been resolved to the satisfaction of the official receiver within 10 months of the bankruptcy order. It is considered that after the cut-off date of 10 months from the date of the bankruptcy order, there is insufficient time left to undertake the early discharge process and afford the bankrupt any advantage.
It should be noted that the bankrupt has no right to an early discharge.
Discharge should not be delayed to deal with matters of administration but the official receiver should be satisfied that there is sufficient information available to apply the early discharge process.
The official receiver is required to give notice in writing to all known creditors and to any insolvency practitioner trustee of his/her intention to file a notice with the court that an investigation of the conduct and affairs of a bankrupt is unnecessary or concluded and that the early discharge process is being pursued. [note 2] The official receiver should not give notice (on form EDNCR) until/unless;
(a) 3 months have elapsed since the report to creditors was issued,
(b) any information received from creditors requiring further investigation or enquiry has been dealt with,
(c) all asset matters have been resolved to the satisfaction of the official receiver or the insolvency practitioner trustee,
(d) the official receiver is satisfied that early discharge will not affect the realisation of an asset or potential asset,
(For example, if the bankrupt is due to receive a lump sum from a pension policy on his/her 65th birthday, and that birthday falls between the date the early discharge would otherwise take effect and the date when the bankrupt would be discharged automatically, then the official receiver should not follow the early discharge procedure to ensure that the interests of creditors prevail (by the lump sum being claimed as after-acquired property.)
(e) the investigation process is concluded and less than 10 months have elapsed since the date of the bankruptcy order, and
(f) except in exceptional circumstances, an up to date review of the bankrupt's income has been completed in cases where no Income Payments Order (IPO) / Income Payments Agreement (IPA) has already been made/reached. (see paragraph 22.13EA).
(g) if an insolvency practitioner has been appointed as trustee he/she has been telephoned prior to sending out form EDNCR to establish whether there are any problems which may lead the official receiver to conclude that early discharge would not be appropriate. A note of the telephone conversation should be made on form EDTIP.
Note: At all times during the life of a case, a record of all decisions made must be kept and evidenced. This will provide a clear audit trail of the decision-making process and will enable the official receiver to justify his/her decision should it become necessary.
The official receiver should also be aware that;
(a) where the bankrupt is making proposals for an Individual Voluntary Arrangement (IVA), the official receiver should not follow the early discharge procedure as a discharged bankrupt is unable to propose an IVA in respect of the bankruptcy debts [note 3],
(b) if the early discharge process is not applied as a result of the bankrupt’s non co-operation and he/she co-operates at a later date to the extent that the official receiver is subsequently satisfied that his/her conduct and affairs require no further investigation, the early discharge process should be applied at a later stage (if appropriate - see (a) to (f) in paragraph 22.11EA), and
(c) if the bankrupt’s discharge has been suspended and the suspension of discharge is subsequently lifted, the official receiver should consider at this stage whether to apply the early discharge process.
After giving notice to creditors and any insolvency practitioner trustee, the official receiver must await the expiry of 28 days and then check whether any objections have been received. [note 4] In some cases, it is possible that the objection will be sent to OR Banking Section with an objection to the granting of the official receiver’s release as trustee (see paragraph 22.21EA).
If the case has been transferred to the RTLU, the official receiver must ensure that he/she immediately forwards any information or documentation (including telephone calls and e- mails) which would impact on the early discharge process to the RTLU.
If any objections are received, see also paragraphs 22.14EA - 22.18EA.
If no objections have been received then, after waiting a further 7 days to allow for any late objections, the official receiver must file in court 2 copies of Form 6.82 (form EDNOT) stating that the investigation of the conduct and affairs of the bankrupt is unnecessary or concluded. [note 5] The court will endorse each copy with the date of filing and return one copy to the official receiver. The official receiver must send a copy of the endorsed EDNOT to the (former) bankrupt.
The bankrupt is discharged on the date form EDNOT is filed at court as evidenced by the endorsement referred to above. The date of the bankrupt's discharge must be entered onto LOIS as soon as the official receiver receives form EDNOT endorsed by the court.
Form EDNOT refers to the bankrupt's continuing obligation under section 333(1). Post discharge the bankrupt still has a duty under section 333(1) to give the official receiver or insolvency practitioner trustee information as to his/her affairs. However, the bankrupt is not required to give notice under section 333(2) to the official receiver or insolvency practitioner trustee regarding after-acquired property once he/she is discharged.
If the official receiver receives subsequent requests for evidence of discharge date, he/she should direct the former bankrupt to the court. (See paragraph 22.7EA.)
When the official receiver is trustee and no IPA has previously been reached or IPO obtained, the official receiver must (unless there are exceptional circumstances - see below) complete a further review of the bankrupt's income before considering filing with the court a notice stating that investigation of the conduct and affairs of the bankrupt is unnecessary or concluded. [note 1] Three months after the report to creditors has been distributed, the official receiver must send the bankrupt form EDREV accompanied by an Income and Expenditure questionnaire. The bankrupt is required to return the questionnaire to the official receiver within 14 days of the date on form EDREV.
Income payments order/agreement
Where the bankrupt appears to have income in excess of what he/she needs to pay for the reasonable domestic needs of himself/herself and family i.e. "real disposable income" and a meeting of creditors is not being called, or has not been called, an IPA should be reached with the bankrupt or IPO obtained by the official receiver acting as trustee before the early discharge process is pursued. [note 6]
The agreement should be reached, or the order obtained, before the official receiver takes any further action regarding early discharge.
Failure to comply with income review
If the bankrupt does not return the questionnaire within 21 days (14 days plus 7 days allowing for postal delays etc.), then, unless the bankrupt offers a reasonable explanation (at the same time as form IPOQ is submitted) as to why he/she was unable to comply within the given time, the early discharge process should not be pursued. The official receiver should not contact the bankrupt to request an explanation as to why form IPOQ has not been submitted and the bankrupt will have to wait for the full 12-month period to elapse before obtaining his/her discharge.
Failure to return the Income and Expenditure questionnaire within the specified time will be considered non-cooperation for the purposes of applying the early discharge process. However, the official receiver should not make application to suspend the bankrupt's discharge unless there are additional matters of non- cooperation which justify it.
The official receiver should not follow the early discharge procedure if he/she is unable to complete a review of the bankrupt's income or if he/she does not accept the explanation as to why form IPOQ has not been submitted within the specified time. Instead the bankrupt will be discharged one year from the date of the bankruptcy order.
In exceptional circumstances it is not necessary for the official receiver to send out form EDREV and Income and Expenditure questionnaire IPOQ. For example, where the bankrupt's only source of income is disability benefit and this situation is unlikely to change, a further income enquiry should not be made but otherwise the early discharge process should proceed in accordance with paragraph 22.11EA.
(For further information on IPAs and IPOs see Chapter 31.7.)
If a creditor or the trustee has any objection to the official receiver filing a notice with the court under section 279(2), he/she may, within 28 days of the date of the written notice (form EDNCR), inform the official receiver in writing of the objection, giving reasons for that objection.
A valid objection is one which would result in the official receiver changing the decision about whether further investigation or enquiry into the conduct and affairs of the bankrupt is necessary. For example, a creditor may provide previously unknown information which identifies undisclosed assets, liabilities or misconduct on the part of the bankrupt which contributed significantly to the cause of the bankruptcy.
This further investigation or enquiry may only take a couple of hours or it may take a couple of months. Once resolved satisfactorily, the early discharge process should continue, assuming that this is within 10 months of the bankruptcy order. If not resolved satisfactorily it is likely that there will be some consequence e.g. further investigation possibly leading to an application for a BRO and/or statement of facts. [note 7](See
The official receiver or insolvency practitioner trustee may also consider applying to suspend the bankrupt’s discharge (e.g. for non cooperation).
A valid objection to the early discharge process should not result in the official receiver taking no action other than stopping the early discharge process. However, it does not necessarily follow that every case with a valid objection will end up on the FI register with an application for a BRO and/or statement of facts being submitted.
Examples of relevant misconduct which may result in the early discharge process being suspended are as follows;
(a) non-disclosure/removal of assets;
(b)obtaining credit without disclosing his/her bankrupt status;
(c) disposal of assets at less than their market value resulting in a loss to creditors;
(d) payment of some creditors in preference to others;
(e) excessive pension contributions;
(f) failure to supply goods or services wholly or partly paid for, resulting in a loss to creditors;
(g) incurring debts (as an individual or a trader) which they had no reasonable prospect of paying;
(h) neglect of business affairs of a kind which may have materially contributed to, or increased the extent of the bankruptcy;
(i) fraud or fraudulent breach or trust;
(j) failure to co-operate with the official receiver or trustee; and
(k) failure to make a full disclosure of assets and liabilities.
The official receiver should be aware that an insolvency practitioner trustee may object on the grounds that discharge would affect the realisation of an asset which he/she is dealing with (see paragraph 22.11EA(d)). However, it would not be valid for an insolvency practitioner trustee to object to early discharge solely on the grounds that the bankrupt may fail to co-operate post discharge and hamper the realisation of an asset.
Early discharge cannot be withheld in anticipation of future misconduct. The bankrupt is still under a duty to provide information after discharge and the trustee is able to make application under section 363 to enforce this duty.
Where the bankrupt has withdrawn funds from an overdrawn account or by using a credit card prior to the bankruptcy order, (e.g. to pay the petition deposit), the bank or credit card company may routinely object to the bankrupt’s early discharge on the grounds that the bankrupt was aware that the funds would not be repaid.
If the bank or credit card company do not provide any other grounds for objecting to the bankrupt’s early discharge then the official receiver should reject such an objection as, although it would be considered for BRO/BRU purposes, such conduct would not be considered sufficiently serious on its own to warrant accepting a BRU or making application for a BRO. In such circumstances, the official receiver should apply the early discharge procedure if it is otherwise appropriate to do so. (See paragraphs 22.11EA and 22.16EA).
The bankrupt has no legislative right to object to the granting of early discharge. The bankrupt may assert that he/she may prefer not to be discharged early, for example, because he/she is concerned about incurring further debt or because he/she is involved in legal proceedings. However, the official receiver should proceed with the early discharge notwithstanding any representations of this nature made by the bankrupt.
If the official receiver receives an objection from a creditor or trustee to the filing of a notice under section 279(2) and he/she rejects that objection, the official receiver must not file the notice in Form 6.82 (form EDNOT) until;
(a) he/she has given notice of the rejection and the reasons for the rejection to the objecting creditor or trustee and,
(b)14 days have expired from the date of the decision to reject the objection to allow time for further representations and an appeal under Rule 7.50(2), or
(c) until an appeal under Rule 7.50(2) has been heard by the court. [note 9]
The official receiver is not required to inform all creditors of the rejection.
If the creditor(s) and/or trustee wish to appeal against the official receiver's decision, they have 14 days from the date on form EDOBJ in which to bring such an appeal.
Unless the appeal court orders otherwise, the creditor/trustee must serve a copy of any appeal application on the official receiver;
(a) as soon as practicable; and
(b) not later than 7 days after it is filed in court.
The official receiver may file a respondent's notice within;
(a) such period as may be directed by the court; or
(b) where the court makes no such direction, within 14 days of service of the appeal application.
Unless the appeal court orders otherwise, the official receiver must serve a copy of his/her response on the appellant;
(a) as soon as practicable; and
(b) not later than 7 days after it is filed in court.[note 10]
Otherwise, over the relevant period, no steps should be taken by the official receiver to advance the early discharge process.
If the official receiver receives an objection which he/she considersvalid and further investigation is necessary, Form 6.82 must not be filed at court and the official receiver should;
(a) contact the trustee and/or objecting creditor(s) for further information (on form EBOBJ),
(b) consider whether an application for a bankruptcy restrictions order would be appropriate,
(c) inform the objecting trustee or creditor(s) of the outcome of any further investigation including confirmation as to whether the early discharge process has been halted; and
(d) consider issuing a further report to creditors.
If the information results in the investigation decision being changed, then the case may also be marked FI and added to the register.A valid objection should not result in the official receiver taking no action other than stopping the early discharge process. However, it does not necessarily mean that every case with a valid objection will be recorded as FI with a BRO and/or statement of facts being submitted.
If an objection which was considered to be valid is subsequently resolved, the early discharge process can continue, provided less than 10 months have elapsed since the bankruptcy order was made.
If the official receiver's further investigation is concluded within 10 months of the bankruptcy order, the official receiver must (subject to the exception in paragraph 22.20EA(a) below);
(a) notify the objecting creditor(s) or trustee that the investigation is concluded,
(b) wait 14 days to allow time for any appeals under Rule 7.50(2),
(c) ensure that 35 days have elapsed since sending out the first early discharge notice or early discharge and release notification (form EDNCR.) If 35 days have not yet elapsed, the filing in court of Form 6.82 must be delayed in case other objections are received. (35 days represents 28 days to allow for objections under rule 6.214(2) and a further 7 days to allow for any late objections.) [note 11]
If no appeal or other objections are received, the official receiver must then file in court 2 copies of Form 6.82 stating that the investigation of the conduct and affairs of the bankrupt is unnecessary or concluded. [note 12]
The court will endorse each copy of the Form with the date of filing and return one copy to the official receiver. The official receiver must send a copy of the endorsed Form 6.82 (form EDNOT) to the bankrupt.
The bankrupt is discharged on the date Form 6.82 (form EDNOT) is filed at court. The date of the bankrupt's discharge must be entered onto LOIS as soon as the official receiver receives Form 6.82 (form EDNOT) endorsed by the court.
22.20EA Exceptions to early discharge on completion of investigation
The early discharge process will not be applied on conclusion of an investigation where;
(a) the official receiver's investigation reveals that there are matters of misconduct but, for whatever reason, it is not in the public interest to pursue, then early discharge would not be appropriate and the bankrupt will instead be discharged automatically one year from the date of the bankruptcy order. This can include cases at the CAR stage see paragraph 15.51 regarding exceptional cases.
(b)the official receiver's investigation is concluded more than 10 months after the bankruptcy order, the bankrupt will not benefit from an early discharge as there is insufficient time to give the requisite notice to creditors and deal with any objections. Instead, the bankrupt will be discharged automatically one year from the date of the bankruptcy order.
The official receiver may apply to the Secretary of State for his/her release as trustee when the administration of a bankruptcy estate is for all practical purposes complete. The official receiver must send notice of his/her intention to apply to the Secretary of State for release to all creditors of which he/she is aware, and to the bankrupt.[note 13]
Form EDNCR is a combined notice to creditors of;
(a) the official receiver's intention to file a notice under section 279(2) that the investigation of the conduct and affairs of the bankrupt is concluded [note 14], and
(b) notice of the official receiver's intention to apply to the Secretary of State for release as trustee.
This form may be used where the criteria outlined in paragraph 22.11EA are met and where the official receiver has completed his/her administration as trustee of the bankruptcy estate.
Where the combined notice is used, creditors have 21 days in which to object to the Secretary of State (OR Banking Section) regarding the granting of the official receiver’s release after which time the release may be granted. (For further information on the release of the official receiver as trustee see Chapter 37.)
All creditors may, within 28 days of the date on form EDNCR inform the official receiver in writing of any objection to the early discharge of the bankrupt, giving reasons for that objection. [note 15] The official receiver should allow a further 7 days to allow for any late objections (see also paragraphs 22.14EA - 22.18EA)
The official receiver should note that where a combined notice is issued, objections to the early discharge process may be lodged with the Secretary of State (in practice OR Banking) in error. Such objections should be considered as if they were lodged with the official receiver directly.
If the bankrupt is discharged early under s279(2) and the official receiver subsequently considersthat a bankruptcy restrictions order (BRO) would be appropriate, the official receiver may make an application for a BRO or accept a bankruptcy restrictions undertaking (BRU) [note 16];
(a) before the end of the 12 month period following the bankruptcy order (although this period ceases to run when the running of the discharge period is suspended), or
(b) with the permission of the court.
It may be appropriate to make application for a BRO or accept a BRU between the date of early discharge and the 12 month anniversary of the bankruptcy order where, for example,
(a) the former bankrupt fails to cooperate with the official receiver or trustee regarding the realisation of an asset, or
(b) where new information comes to light regarding the conduct of the former bankrupt.