Insolvency Made Clear: A Guide for Debtors

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Effect Of Bankruptcy 2.16 Investigations by the Trustee in Bankruptcy A few days after the making of a bankruptcy order, the Insolvency Service will contact the bankrupt to organise an interview with their Trustee in Bankruptcy. From the bankrupt’s perspective, all the details of the bankruptcy are sorted out by the Trustee in Bankruptcy. Most of a Trustee’s time is spent understanding the assets and liabilities of the estate. They have powers under the Act which help them to do this. 2.16.1 Investigation powers The bankrupt is under a duty to cooperate with the Trustee in Bankruptcy under s333 of the Act. This includes giving information to the Trustee about his affairs, meeting the Trustee in person (‘attend on the Trustee’), and “do all such things as the Trustee may for the purpose of carrying out his functions reasonably require”. This includes giving information about property acquired while still an undischarged bankrupt even after the bankruptcy has been discharged. Failure to cooperate with the Trustee without a reasonable excuse is contempt of court. At first, the Trustee will speak to the bankrupt informally, perhaps at the debtor’s home or at the office of the Trustee. If the Trustee is the Official Receiver (the ‘OR’), they will usually require the bankrupt to fill in a ‘Bankruptcy Preliminary Information Questionnaire’ prior to the face to face interview. A copy of this form can be found at https://www.nationalbailiffadvice.uk/img/PIQB.pdf. If the interviewee is unable to complete the questionnaire, for example, because they are unable to read, the Official Receiver will ensure that the form is read to them. The Trustee will ask the bankrupt to set out all the property they are aware of, all their debts and the details of all major transactions undergone in the last few years. This will not be done under oath, but it remains a criminal offence to conceal property or to lie to the Trustee in Bankruptcy: see the full list of offences in Chapter 7. Without giving the full list of offences, it is generally the case that any scheme which the bankrupt may think of in order to avoid paying creditors (admitting a false debt; concealing information; transferring property away in advance of bankruptcy; etc.) is a criminal offence. If the Trustee does not think this response is adequate, they can apply for a public or private examination of the bankrupt. This is a formal hearing where the Trustee will ask the bankrupt questions under oath. It is substantially easier for the bankrupt and the Trustee not to use the examination process. In practice, it is only likely to happen when the Trustee suspects that the bankrupt is hiding something important. The court has discretion about whether or not to make the order for examination. However, unless it is wholly unreasonable, unnecessary or oppressive the 35
Insolvency Law Made Clear – A Guide For Debtors court is likely to accede to the Trustee’s request. The mere fact that the examination is inconvenient or involves a lot of preparatory work does not make it unreasonable. It would potentially be unreasonable if the examination was to take place after a significant and unexplained delay, or if there is no real prospect of a recovery for the bankrupt’s estate. The court is likely to start with the premise that the OR or the Trustee is not going to waste their time for nothing. The OR must seek a public examination if creditors of more than half of the value of the bankrupt’s debts require them to (s290(2) of the Act). The creditors will need to give a reason why they require a public examination. If the OR thinks the request is unreasonable, they may apply to the court for an order to be relieved from making the application (see r10.101). The court will fix a date for the public examination of the bankrupt. Failure to attend is contempt of court (s290(5)). The examination itself is similar to a cross-examination of a witness in a usual civil trial. The OR and any creditors have the right to use a barrister to put questions to the bankrupt, and the bankrupt has the right to instruct a barrister for the purpose of putting any questions required to explain or qualify any answers given (r10.103), if they can afford it. The main difference from a civil trial is that the record may be used as evidence in any further proceedings under r10.103(5). In particular, it can be relied on in criminal proceedings. However, if there are existing criminal proceedings, the court may decide to adjourn the hearing if it is of the opinion that the examination might prejudice a fair trial (r10.103(6)). In practice, a public examination typically precedes criminal proceedings and it is not common to have both in parallel. A private examination is slightly different. As the name suggests, it is held in private. Only the bankrupt can be subject to a public examination under s290, but under s366(1) the court can also summon the bankrupt’s spouse or former spouse, anyone known to possess any property in the bankrupt’s estate or who is indebted to the bankrupt, or anyone who may be able to give information concerning the bankruptcy. The consequence is that the bankrupt cannot hide behind their ignorance of their own financial affairs: the Trustee is likely to ask them who does know the answers to their questions, and then examine them under s366. However, despite being held in private, it is an equally serious affair. The court has the power to issue an arrest warrant to support the private examination. A private examination does not need to take place in court itself, or even in the UK (s367(3)). Typically someone who receives legal advice is able to refuse to disclose it. This rule is known as ‘legal professional privilege’, and the advice is said to be 36
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INSOLVENCY LAW MADE CLEAR A GUIDE F
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Published June 2021 ISBN 978-1-9163
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Acknowledgments I owe special thank
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Insolvency Law Made Clear - A Guide
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