practitioner > Chapter 9 > Discharge from bankruptcy
There are instances where practitioner trustees ask Official Receivers (ORs) to make an application to suspend the running of a bankrupt's discharge period. The OR must make an independent and objective assessment of the evidence available, and should only make the application if there is evidence of at least one material default by the bankrupt. It is important that matters are not left until the eleventh hour as delay may rule out an application. If the bankrupt is in default there should be no undue delay in pursuing compliance or seeking to suspend the discharge.
ORs should avoid taking shortcuts in cases where time is running out. The case of Jacobs v Official Receiver, highlights this point. Mr Jacobs appealed against what was, in effect, an "interim order" made by a District Judge on the last day of the three year period of Mr Jacob’s bankruptcy. His discharge period was extended so that it would be possible to hear a substantive application. If the extension had not been ordered, discharge would have been granted automatically.
Mr J Burton QC, sitting as a Deputy Judge held that where there is insufficient time to hear an application before the end of the discharge period, the court could extend the period. This did not mean the application could be made on an ex-parte basis, or that the court should make an order where it was not satisfied there had been a default by the bankrupt.
This judgement assists ORs when they are faced with the prospect of having to make applications to suspend discharge periods towards the end of a bankruptcy.It does not, however, mean that shortcuts can be taken in case preparation, evidence, or (without leave of the court) service of papers on the bankrupt.
(First published in Dear IP no. 42, September 1998)
2. Suspension of Discharge Period in Bankruptcy
Under the provisions of section 279(3) of the Insolvency Act 1986 the court may suspend the running of the period during which a person remains bankrupt on the application of the OR, if the court is satisfied that the bankrupt is failing to comply with his obligations under part IX of the Act.
The suspension of the discharge period will not of itself, assist practitioners in the administration of the bankruptcy. Practitioners are reminded that a private examination (which may be held on the application of the trustee) under section 366 of the Act will often be of direct benefit to them in obtaining information from, and the co-operation of the bankrupt. Practitioners should only request the OR to apply for a suspension of the discharge period where the practitioner has exhausted other remedies available to him to obtain the bankrupt’s co-operation. Where a bankrupt has failed to make voluntary payments an Income Payments Order should be obtained. If the bankrupt fails to make the payments due under the terms of the order, the court may regard that as evidence of misconduct in any future suspension application.
If a practitioner considers that the misconduct of a bankrupt justifies an application to suspend the discharge period, that misconduct should be brought to the attention of the OR immediately, and ideally not less than six months before the discharge period is due to expire. However, if there is gross misconduct after that point, the OR will consider an application, particularly if every effort has been made to secure the bankrupt’s co-operation. Practitioners should be aware that the court may decline to make an order where there is insufficient time available to deal properly with an application. The hearings are often opposed, and the court may not be able to accommodate any necessary adjournments.
(First published in Dear IP no. 18, July 1991 followed by a second publication in Dear IP no.31 August 1994)
3. Suspension of Discharge Under Section 279(3) - Failure to co-operate with Trustee
Practitioners are reminded that Dear IP number 31- August 1994 (see article 2 above) set out the evidential and time factors to be borne in mind when submitting suspension requests. Unfortunately, ORs are still receiving a large number of requests from practitioners close to the end of the discharge period.
Practitioners will be aware that in every case the OR has to consider the strength of the trustee's evidence before making an application to court. The court may decline to make an order where there is insufficient time available to deal properly with an application. The hearings are often opposed, and the court may not be able to accommodate any necessary adjournments. To prevent this occurring in the future, practitioners are asked to bring misconduct matters to the OR as soon as possible, and unless the circumstances are exceptional not less than six months before the discharge period is due to expire. Last minute requests will be rejected unless they are based on information which has only recently come to light, and every effort has been made to secure the bankrupt’s co-operation.
In a suspension application the court has to be satisfied that the bankrupt has failed to comply with his obligations under Part IX of the Act. The practitioner must therefore provide the OR with evidence of non-co-operation eg documents frequently requested but never produced; evidence of removal or concealment of assets; non provision of current employment details where these have been specifically requested, etc.
Practitioners should bear in mind that all allegations should be supported by evidence, preferably documentation. The practitioner should also be able to show that he has made every effort to obtain the bankrupt's co-operation. The occasional letter asking the bankrupt to contact his trustee would probably not be considered sufficient evidence by the court.
Finally, practitioners are reminded that the suspension of discharge was not designed to be a way of enforcing compliance, and the OR will not look favourably upon applications made to extend discharge periods to facilitate enquiries which could and should have been completed at an earlier date. Practitioners are reminded that other remedies exist, even after discharge, to force bankrupts to disclose or hand over assets, and that private examinations can also be conducted after discharge. Also, if a bankrupt has failed to make voluntary payments, then an Income Payment Order (IPO) should be obtained. If a bankrupt then fails to make payment under the terms of the IPO, the court may regard that as evidence of misconduct at any future suspension application.
(First published in Dear IP no, 34, October 1995)
Act (Individual Insolvency Provisions)
Changes to Discharge from Bankruptcy
will be an automatic 12-month discharge period for most bankrupts and
the summary administration provisions will be abolished. It will be
possible to obtain discharge earlier than this but only where the
bankrupt has co-operated fully with the official receiver and where any
matters raised by creditors are investigated to the satisfaction of The
Insolvency Service. An
official receiver will have discretion as to what cases are investigated
in order to target resources effectively, but generally he will deal
with bankrupts in very much the same way as now by enquiring into
bankrupts’ affairs in every case, taking on board comments and
requests from creditors. In
this way cases will be dealt with on the basis of conduct, not an
arbitrary financial limit and this will ensure that culpable conduct is
brought to light early on.
Automatic And Early Discharge
most cases there will be two points at which discharge will occur:
either where the official receiver files notice that any further
investigation is unnecessary or concluded (“Early Discharge”) or
after 12 months has elapsed (“Automatic Discharge”).
Rule 6.214A sets out the circumstances in which the notice of concluded/unnecessary
investigation (in new prescribed form 6.82) will be filed in court once
any objections from dissatisfied parties to such notice have been dealt
must be considered if received by the official receiver within 28 days
of notifying creditors of his intention to file.
an objection is turned down, the dissatisfied party may appeal within 14
days of the decision.
bankrupt will obtain his discharge when form 6.82 is filed, and after
objections/appeals have been dealt with.
cases where the official receiver is unable to conclude his
investigation beforehand, discharge occurs after 12 months from the date
of the bankruptcy order.
As is currently the case, no application will be necessary and a certificate of discharge will only be issued on the request of the former bankrupt to the court.
provisions apply for an individual who was an undischarged bankrupt
immediately before commencement of the individual insolvency provisions of Part 10
of the Enterprise Act 2002, ie 1 April 2004.
Discharge will occur on whichever is the earlier of one year
beginning with commencement or on the date on which discharge would have
occurred under the terms of the original order.
most pre-commencement second-time bankrupts, the date of discharge will
be the earlier of five years from commencement or the date on which the
court may order discharge on an application by the bankrupt.
a pre-commencement bankrupt subject to an order suspending discharge,
transitional provisions will apply.
Where the matters giving rise to the order have been dealt with
satisfactorily within 12 months of commencement, then discharge
will occur at the end of that 12‑month period.
Where this is not done until after the 12 month period then
discharge will be calculated according to the time that would have
remained under the pre‑commencement rules.
Applications For Suspension Of Discharge
a safeguard against non-cooperation, the suspension provisions are
retained but existing rule 6.215 is redrafted to reflect the ability of
a trustee other than the official receiver to make a direct application
will therefore no longer be necessary for a trustee to refer
non-cooperation to the official receiver so that the latter can apply to
the court for suspension in appropriate cases. The trustee will notify
the official receiver of his application and vice versa.
Suspension applications will need to be made without undue delay since
Bankruptcy Restrictions Order (BRO) applications (see Article 5 of this
Chapter) have to be made within 12 months of the bankruptcy order
unless leave of the court is obtained.
As a suspension order effectively stops the clock ticking, the
official receiver or trustee should make the application as soon as they
have sufficient evidence of non‑cooperation, otherwise if
misconduct later comes to light it may be too late for a BRO
6.216, concerned with lifting suspension of discharge, is modified to
reflect the trustee’s ability to apply under 6.215 above.
General enquiries may be directed to Policy.email@example.com; Telephone 020 7291 6740
Bankruptcy Restrictions Orders/Undertakings
Chapters 28 to 30 of the Rules set out the detailed procedure for
Bankruptcy Restrictions Order (BRO) and Interim Bankruptcy Restrictions
Order (IBRO) applications, which in both cases will be made by the
Secretary of State or the official receiver acting on her behalf.
Bankruptcy Restrictions Undertakings (BRU) made between the
bankrupt and the Secretary of State are also covered.
assist in ensuring that the appropriate cases are targeted for BROs or
BRUs, or for early discharge, a more effective dialogue will be
encouraged between creditors and the official receiver.
The official receiver’s Report to Creditors will be more
detailed and timescales for issuing it will be relaxed where necessary
to ensure that a more meaningful report can be produced.
In addition, any information which trustees possess and which may
affect the official receiver’s decisions, should be passed on to the
official receiver at the earliest possible stage.
Bankruptcy Restrictions Orders
Restrictions Orders are introduced for those bankrupts whose conduct has
been irresponsible, reckless or otherwise culpable.
BROs will place restrictions on bankrupts for between two and 15
previous bankruptcies will be taken into account by the courts when
considering BRO cases. This
civil procedure provides an alternative to prosecution for bankrupts
whose conduct warrants further action, and provides a better level of
protection for the public. Those
subject to BROs will be entered onto the publicly accessible Individual
for a BRO must be supported by a report setting out its grounds.
Evidence from other parties (such as the trustee) and any filed in
opposition by the bankrupt must be by affidavit. Such opposing evidence
must be served upon the Secretary of State within three days of filing
of a BRO hearing, with a copy of the application and report, is to be
served on the bankrupt at least 14 days beforehand.
the court makes a BRO, two sealed copies are sent to the Secretary of
State, one of which is sent to the bankrupt (new rules 6.241 to 6.244).
a general point, where an order for suspension of discharge is in force,
an application for a BRO should not be made, as the court will expect
the matters giving rise to the order to have been dealt with beforehand
Interim Bankruptcy Restrictions Orders
court will also be able to make an Interim BRO in cases where the
alleged misconduct appears to be so serious that it is considered to be
in the public interest that there is continuous protection from the
individual in question. This
will, for example, be the case where the applicant has not received
necessary information until late into the bankruptcy and the court is
unable to hear that application until after discharge and the consequent
lifting of the bankruptcy restrictions.
Chapter 29 sets out the procedure for IBRO applications, which will only
be made in more serious cases where immediate public protection is
for an IBRO must be supported by a report setting out its grounds, any
evidence from other parties (such as trustees) to be by affidavit.
of the IBRO hearing, with a copy of the application and report, is to be
served on the bankrupt two days beforehand.
the court makes an IBRO, two sealed copies are sent to the Secretary of
State, one of which is served on the bankrupt.
IBRO may be set aside on application by the bankrupt giving seven days
notice of the hearing to the Secretary of State with a copy of the
application and affidavit evidence in support. If the court sets an IBRO
aside, sealed copies of the order are sent to the Secretary of State,
one of which is sent to the bankrupt (new rules 6.245 to 6.248).
Bankruptcy Restrictions Undertakings
Restrictions Undertakings are introduced to enable a bankrupt to agree
in writing to restrictions to be imposed upon him or her. It will have
the same legal effect as a BRO made by the court and will provide early
protection for business and the public. The often considerable time and
cost, for all parties, of court proceedings, will be eliminated.
BRU is made in writing between the bankrupt and the Secretary of State
and takes effect when signed by both parties, with a copy being sent to
the bankrupt and the court.
BRU may be annulled on application by the bankrupt giving 28 days notice
of the hearing to the Secretary of State with a copy of the application
and affidavit evidence in support. If the court annuls a BRU, two sealed
copies of the order are sent to the Secretary of State, one of which is
sent to the bankrupt (new rules 6.249 to 6.251).
purpose of the BRU procedure is to avoid, where possible, the time and
expense of court proceedings. Generally, where an agreement can be
reached this will entail some discount on the period that would have
been sought via the BRO route.
General enquiries may be directed to Policy.firstname.lastname@example.org; Telephone 020 7291 6740
BANKRUPTCY RESTRICTIONS ORDER PROCESS
6. Rule 6.214A -
Official Receiver intends filing a notice that an investigation of the
conduct and affairs of a bankrupt is unnecessary or concluded under
section 279 (2) Background
The Insolvency Service provides
guidance to its staff on early discharge and other issues through its
Technical Manual (Volume 1) which is one of the publications that
is available (through its web site
http://www.insolvency.gov.uk/pubsscheme/) for public inspection under the
Freedom of Information (FOI) Publications Scheme. Chapter 22 of the
manual provides guidance on discharge from bankruptcy. Section 279(2)
Insolvency Act 1986 provides for “early discharge” from bankruptcy
and came into effect on 1 April 2004.Official Receivers have been given
guidance on what constitutes a valid objection to the filing of a notice
for early discharge which insolvency practitioners may find useful.
If the Official Receiver is of the
opinion that early discharge is appropriate because the ‘investigation
of the conduct and affairs of the bankrupt under section 289 is unnecessary
or concluded’ then that view is notified to the creditors and
any outside trustee before the requisite notice is filed at court.
The Official Receiver will ensure that before the notice is issued:
At least 3 months
have elapsed since the report to creditors was issued,
Any information received
from creditors requiring further investigation or enquiry has been dealt
The investigation process
is concluded and less than 10 months have elapsed since the date
of the bankruptcy order,
All asset matters have
been resolved satisfactorily, and where appropriate,
A review of the bankrupt's
income has been conducted.
Aim of early discharge
The general view of the Insolvency
Service is that all bankrupts could be eligible for early
discharge and cases continue on that route unless there are clear
matters relating to the discharge having an impact on asset realisation
or matters that warrant enforcement action. Enforcement generally means
suspension of discharge applications, matters that may need reporting to
the HQ Criminal Allegations Team or applications for a bankruptcy
restrictions order (BRO). This
may mean in some cases there has been some unfit conduct by the bankrupt
which the Official Receiver has investigated and concluded that there
are insufficient grounds or it is not in the public interest to proceed
with any enforcement action. It should be stressed that early discharge
is not only available where the bankrupt’s conduct is totally
22 of the Technical Manual also gives guidance on what constitutes
grounds for a valid objection to the Official Receiver filing an early
discharge notice. Such an objection is one which would result in the
Official Receiver changing the decision about whether further
investigation 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, which
contributed significantly to the cause of the bankruptcy. Other examples
Obtaining credit without disclosing his/her bankrupt status;
Disposal of assets at less than their market value resulting in a
loss to creditors;
Payment of some creditors in preference to others;
Excessive pension contributions;
Failure to supply goods or services wholly or partly paid for,
resulting in a loss to creditors;
Incurring debts (as an individual or a trader) which they had no
reasonable prospect of paying;
Neglect of business affairs of a kind which may have materially
contributed to, or increased the extent of the bankruptcy;
Fraud or fraudulent breach or trust; and
co-operate with the official receiver or trustee
The early discharge provisions and Rule 6.214A
were dealt with in article 4 of this chapter (Dear IP Issue 16).
It should be remembered that the Official Receiver must only
consider objections if they are received within 28 days of the
notification of the official receiver’s intention to file the early
discharge notice. If the Official Receiver turns down an objection, the
dissatisfied party may appeal within 14 days of the decision.
Applications For Suspension Of Discharge
Article 4 of this chapter also
provided information on applications for suspension of discharge and
advised that as a safeguard against non-cooperation, the
suspension provisions are retained but existing rule 6.215 was amended
to reflect the ability of a trustee other than the official receiver to
make a direct application for suspension. In the circumstances it is no
longer necessary for a trustee to refer non-cooperation to the Official
Receiver; although the trustee should notify the Official Receiver of
any such application being made. The Official Receiver will similarly
notify the trustee.
A similar, consequential, amendment
was made to Rule 6.216, concerned with lifting suspension of
enquiries may be directed to Policy.email@example.com;
Telephone 020 7291 6740
7. Early Discharge Process
The Insolvency Service has recently provided guidance to its staff about the procedures to follow when dealing with the early discharge (ED) process. The main factors of which are set out below.
Prior to starting the ED process the official receiver will be satisfied that all asset matters have been resolved to the satisfaction of the trustee, regardless of whether the trustee is the official receiver or an insolvency practitioner.
That is not to say that all assets have been realised, but that the trustee is satisfied that he/she has sufficient information to deal with them.
Therefore, if an insolvency practitioner has been appointed as trustee, he/she (or more likely an administrator in his/her office) will be telephoned by the case officer in advance of sending out the notice to creditors to find out whether there are any problems with the case. Information received may lead the official receiver to the conclusion that ED should not be considered. A formal note of the telephone conversation will be kept. This will include the name of the person spoken to. If details of any matters are brought to the attention of the case officer during the telephone call these may be followed up with the insolvency practitioner in writing.
What may constitute a valid objection to ED
A valid objection to ED will be resolved by the official receiver making further enquiries and/or carrying out further investigation into the case. Once resolved satisfactorily, the ED process will continue, provided that by that stage it is not too late in the case for this. If not resolved satisfactorily, it is likely that there will be some consequence, such as further investigation likely to lead to a BRO and/or statement of facts or consideration of suspension of discharge (e.g. for non-cooperation) either by the official receiver or the insolvency practitioner. A valid objection to the ED process will result in the official receiver taking further action in addition to stopping the ED process.
It must be stressed that ED cannot be withheld in anticipation of future misconduct or non-co-operation. Unless the debtor is actually failing to co-operate, a suspicion that he/she may fail to do so post bankruptcy is not grounds to suspend the process.
As at all times during the life of a case, a record of all decisions will be made and evidenced so that a clear audit trail of the decision-making process will be available should the official receiver have to justify his/her decision in the future.
General enquiries may be directed to firstname.lastname@example.org; Telephone: 020 7291 6824
8. Application for suspension of discharge
Following amendments made by the Enterprise Act 2002, a trustee other than the official receiver may apply to court for an order under section 279(3) of the Insolvency Act 1986 (suspension of automatic discharge). Under Rule 6.215(3) and (8) it is the court that will notify the official receiver of the hearing and send him/her a copy of any order made. However, the trustee making the application should send a copy of his/her evidence in support to both the official receiver and the bankrupt.
It is vital that the official receiver is kept informed of the process as it is via his/her database that the E-IIR is updated.
Any enquiries regarding the above should be directed towards Sam Roberts, OR Operations Section, Area 5.5, 21 Bloomsbury Street; telephone: 020 7291 6824 email: email@example.com
9. The Enterprise Act 2002 (Disqualification from Office:
General) Order 2006 – S.I. 2006 No.1722
In Issue 16 of Dear IP (February
2004), subscribers were informed of the introduction of the bankruptcy
restrictions order regime (BRO) (by the Enterprise Act 2002). A person
who is subject to a BRO has a number of restrictions imposed on him
under the Insolvency Act 1986 and associated legislation.
a consequence introduction of the BRO regime, it became necessary to
review the many existing statutory provisions, which disqualified
bankrupts from holding an office or a position. This is because those
provisions did not reflect the distinction which the Enterprise Act 2002
made between the culpable bankrupt and the merely unfortunate.
Subsequent to that review, on 29 June 2006 the
Enterprise Act 2002 (Disqualification from Office: General) Order 2006 (S.I.
2006/1722) came into force. The Order amended and extended a number of
bankruptcy restrictions imposed in legislation that is not under the
policy control of the Insolvency Service. The restrictions cover areas
such as pension and charity trustees and members of a number of
Department of Health Bodies. The Order can be accessed on:
Service currently produces a leaflet giving background information on
the BRO regime including its effects, which can be accessed on:
Any enquiries regarding the above should be directed towards, Policy Unit, Area 5.7, 21 Bloomsbury Street, London WC1B 3QW telephone: 020 7291 6738
practitioners are reminded that rule 6.215(5) of the Insolvency Rules
1986 requires a copy of the trustee’s evidence, in support of an
application for suspension of discharge, to be served on both the debtor
and the official receiver at least 21 days prior to the hearing date.
about such applications is provided in article 8 of this chapter.
an insolvency practitioner fails to comply with any requirement of the
rules The Insolvency Service will consider whether the matter should be
referred to the appropriate authorising body.
enquiries regarding this article should be directed towards