Generally, a bankruptcy order will be automatically discharged 12 months’ after it is made. However, it is open to a Trustee in Bankruptcy to apply for the automatic discharge to be suspended, usually on the basis that the bankrupt has failed to comply with the terms of their bankruptcy. The Court has a discretion as to whether to extend the bankruptcy, and this discretion will be exercised depending upon the circumstances of the particular case.
We have recently acted for a client who was subject to a bankruptcy order. Three days before his automatic discharge, and without any prior warning, his Trustees applied to the Court for the automatic discharge to be suspended. We considered the application and took the view that the Trustees’ application had been made on a number of spurious grounds; we advised our client to challenge the application.
One of the grounds upon which the Trustees were pursuing the application was that our client had failed to disclose a number of bank accounts and these were required in order that they could properly investigate his affairs. When the Trustees’ additional evidence was filed, it became apparent that not only had the Trustees been in receipt of all of bank statements for the ‘missing’ accounts for 6 months prior to their application, but they had not asked one single question of our client about the accounts. Given this, we invited the Trustees to withdraw their application but they steadfastly refused.
At the final hearing the Judge agreed with us that the Trustees application was without merit and dismissed it, and made a costs order in our client’s favour. Cheekily, the Trustees asked if the costs could be paid from the bankruptcy estate – so they basically wanted our client to pay for their failings! The (very sensible) Judge refused and held the Trustees’ personally liable for all of the costs – result!
If you would like to discuss any issues arising from bankruptcy, or if you are a Trustee and want to know how to avoid end up on the wrong end of a costs order, please contact Marcella Cox on firstname.lastname@example.org for an initial, no obligation chat.