Discharge from bankruptcy

A discharge from bankruptcy is a statutory process which fees a bankrupt from the restrictions of bankruptcy and most of their bankruptcy debts.  A bankrupt is usually automatically discharged from bankruptcy 12 months after the date of the bankruptcy order, even if no payments have yet been made to creditors.

Once discharged from bankruptcy, a debtor generally has no further liability for the bankruptcy debts. Any assets they acquire after discharge (assuming they were not future or contingent interests during the bankruptcy) may be kept by them. The trustee in bankruptcy (or official receiver acting as trustee of last resort) cannot lay claim to these assets. However, property comprised in their estate at the time of the bankruptcy order remains under the control of the trustee in bankruptcy to be sold for the benefit of the creditors.  

The trustee (or official receiver) may apply to the court for an order to suspend automatic discharge from bankruptcy taking place. The trustee might do this in circumstances where the bankrupt has failed, or is failing, to comply with their obligations under the Insolvency Act (Part IX) or otherwise not fully co-operate with the trustee. Such application to the court must be made before the first anniversary of the making of the bankruptcy order.  

In addition, the official receiver may apply to the court for a Bankruptcy Restrictions Order (BRO) or accept an undertaking. In either case, the bankrupt will continue to be subject to bankruptcy restrictions for the period specified in the order or undertaking (usually between 2 and 15 years). The Official receiver might make this application in cases where the bankrupt’s conduct has been “dishonest, reckless or otherwise culpable”. However, a BRO or undertaking will not affect the discharge of the bankrupt’s debts.

This briefing paper provides an overview of the statutory discharge from bankruptcy process. It also considers the effect of discharge on the bankrupt, the circumstances which may cause automatic discharge to be suspended by the court, and when a BRO or undertaking may be imposed.