Insolvency Made Clear: A Guide for Debtors

Effect Of Bankruptcy
will only choose to substitute an item if there is a substantial difference between
the sale price of the second-hand item and its replacement price. Otherwise, it
is not worth the Trustee’s time to make the sale.
The second exception means that the bankrupt can keep their bed linen, oven
and basic living equipment. Again the exception would allow a Trustee to substitute
an expensive bed for a cheaper one if they deemed it fit. Since second-hand
domestic goods are of little value, it is rare for the Trustee to sell them unless
they are almost new.
2.2.2 Legal claims
The bankrupt’s ‘property’ includes any potential legal claims the bankrupt
could make. Only the Trustee in Bankruptcy can sue third parties; the bankrupt
cannot do so themselves. The bankrupt cannot even act as a litigant in person
even if this comes at no direct cost to the bankrupt’s estate. This is because if
the bankrupt brought a claim and lost, the estate would probably be held liable
for the costs to the defendant. The Trustee is in charge of making all claims on
behalf of the bankrupt. They can abandon an active case, or settle a claim instead
of taking it to court.
There are two exceptions to this rule. Firstly, a bankrupt can appeal against
their own bankruptcy order. Secondly, the bankrupt can bring a claim where
the claim is personal to the bankrupt – for example, a personal injury claim,
a defamation claim or a claim for unfair dismissal. Where a claim is a ‘hybrid’
of both types, such as a personal injury claim where the claimant’s car was also
damaged, the claim can only be made by the Trustee. If the Trustee makes a
recovery, they will recover the personal element on behalf of the bankrupt and
will have to give it back to them and not the creditors. The bankrupt should tell
the Trustee about all the possible claims they could make, as part of describing
all of the assets in the estate.
If the Trustee does not want to go ahead with a case, the bankrupt will need to
ask the Trustee to transfer (‘assign’) them the claim if they wish to do so themselves.
A Trustee would be unlikely to allow a bankrupt to commence litigation
while their bankruptcy was undischarged, but they might consider it afterwards.
A solicitor will be cautious about accepting instructions from an undischarged
bankrupt to ensure that the individual has the right to litigate the claim, rather
than their Trustee.
It frequently happens that a bankruptcy order is made on a judgment debt.
Once the bankruptcy order is made, the bankrupt would have no standing to
even challenge this debt, except with the permission of the Trustee or an order
of the court.
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