Insolvency Made Clear: A Guide for Debtors

Effect Of Bankruptcy
Finally, the following claims are theoretically possible but they are almost
never used:
5. Assignment of book debts: s344 of the Act. When someone trades, they
are likely to have a list of debtors who owe them money. It is possible to
assign the debtors to a third party so that the third party can collect the
money. Such an assignment would not bind the Trustee unless the assignment
has been registered under the Bill of Sales Act 1878. Such registration
requires an application to the Queen’s Bench Division of the High Court. It
is not common to have such a general assignment of debts.
6. Excessive pension contributions: s342A of the Act. Where an individual
has made ‘excessive’ contributions to their pension which has unfairly prejudiced
the creditors, these can be claimed back by the Trustee. This rarely
applies due to the difficulty in showing that the payments were indeed excessive.
It is often easier to show that the pension payments were made to
remove the assets from the estate, i.e. to bring a s423 claim.
7. Extortionate credit transactions: s343 of the Act. If the bankrupt takes
out a loan with ‘grossly exorbitant’ repayments or otherwise ‘grossly contravenes
ordinary principles of fair dealing’ then this can be undone. An
exaggerated example would be where the bankrupt took out a loan of £100
for a month, and then had to repay £10,000 30 days later. This is rarely
applied due to the difficulty in showing that the loan was extortionate. If
the loan is so extreme, the Trustee may be suspicious it was a transaction
at an undervalue.
2.7 Calculating the debts of the bankrupt
The Trustee will compile a list of the debts of the bankrupt. Potential creditors
will be asked to ‘prove’ their debt, i.e. demonstrate that the bankrupt owed them
a certain sum of money. Creditors owed debts of less than £1,000 will not need
to submit formal proof but will be believed automatically unless there is some
reason to challenge the debt: r14.1(3) and para 18A of Sch 9 of the Act.
The making of a bankruptcy order stops the clock on interest accruing under a
debt. Creditors will prove for the amount owed as of the date of the bankruptcy
order. After then, all interest on debts will accrue at the statutory rate of 8% p.a.
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