The administration of a bankruptcy estate is carried out either by the Official Receiver or by an insolvency practitioner and they are known as the trustee in bankruptcy. When a person becomes bankrupt, their assets (with certain exceptions) pass to the trustee in bankruptcy whose function is to realise those assets and distribute the proceeds to creditors (after payment of the costs for dealing with the bankruptcy) and in a prescribed order of priority.
An interest in assets can be realised in one of three ways:
- A third party can purchase the interest;
- The bankrupt can sell the asset and pay over the proceeds to the trustee; or
- The trustee can take possession of the asset to sell it. This option is likely to require expensive court intervention.
Unfortunately, if the bankrupt has no or limited assets, it is unlikely that creditors will get their money back.
If the bankrupt has surplus income above their needs and those of their dependents, the bankrupt may be required to pay that surplus income over to the trustee for the benefit of the bankruptcy estate. Such income payment agreements or orders can last up to 3 years.
There are also powers available to the trustee enabling them, in certain circumstances, to claim assets from third parties where they have been transferred to those parties for no consideration or at an undervalue or where creditors have been paid in preference to other creditors prior to the bankruptcy.
