CREDITOR ACTION AGAINST THE INSOLVENT AND THE INSOLVENT’S PROPERTY - GENERAL
Despite the general prohibition of creditors taking action against the property of the insolvent once insolvency proceedings have commenced (which is generally the presentation of the petition in a winding-up and the date of the order in a bankruptcy), certain creditors retain rights to take action against property (see paragraph 9.3), and other creditors attempt to take action where no rights exist.
There are certain situations where creditors may, in limited circumstances, retain a right to take action against the property of the insolvent after the commencement of insolvency. These circumstances are explained in detail as follows:
Similarly, a creditor may seek to rely on a retention of title clause relating to property in the hands of the insolvent. Such a situation is not, strictly speaking, a creditor taking action against the property of the insolvent as the property remains in the creditor’s ownership. Guidance on retention of title can be found in Chapter 63.
When a winding up order is made against a company, no action or proceeding can be taken against the company without the permission of the court [note 1]. Matters are slightly different in bankruptcy as, where bankruptcy proceedings are pending; the court may stay any proceedings or allow them to continue on any terms that it thinks just. When a bankruptcy order is made, the creditor can have no remedy against the bankrupt and cannot commence any legal proceedings [note 2] [note 3].
Where proceedings are on-going at the date of the order, or are commenced after the date of the order, the official receiver should notify the claimant and the court of the making of the order and the statutory provisions outlined above [note 4].
Occasionally, a creditor will continue to write to a bankrupt, or otherwise contact him/her, requesting repayment of a debt, despite being on notice of the bankruptcy. Assuming that the official receiver is satisfied that the debt concerned is not a non-provable debt (see Chapter 40, Part 3), he/she may write to the creditor reminding them of the making of the bankruptcy, informing them that they are listed as a creditor in the proceedings and outlining the restriction on remedies (see paragraph 9.4) [note 5]. Ultimately, however, the responsibility for dealing with continuing contact by creditors rests with the bankrupt, who may choose to report matters to the Police where such contact is perceived to be harassment, or similar.