What Is the Role of a Trustee in Bankruptcy?
Declaring bankruptcy is a long and complex legal process that requires the oversight of a licensed insolvency practitioner appointed to the role of bankruptcy trustee.
Bankruptcy trustees are integral to the bankruptcy procedure, and will oversee key tasks such as liaising with creditors, selling assets and arranging income payment orders.
If you’re considering declaring bankruptcy, the expert team at Irwin Insolvency is here to explain everything you need to know about the role of a bankruptcy trustee.
What Is a Bankruptcy Trustee?
The Insolvency Act 1986 stipulates that a bankruptcy trustee must be appointed to oversee all cases of bankruptcy. By law, a bankruptcy trustee must be a licensed insolvency practitioner, as they are required to oversee what is a complex financial procedure.
A bankruptcy trustee is tasked with ensuring that the bankruptcy of an individual is carried out legally. A bankruptcy trustee takes control of the process and, in doing so, they take control of an individual’s finances, bank accounts and assets. Effectively, the bankruptcy trustee takes over management and responsibility for the bankrupt individual’s estate until they are discharged.
Throughout the bankruptcy process (which usually lasts 12 months), the bankruptcy trustee is granted wide-ranging powers and authority by the Insolvency Act 1986. They can investigate the bankrupt individual or creditors demanding payments, they can freeze accounts and sell assets, and they can pay creditors with the proceeds of the bankrupt individual’s estate.
Who Chooses a Bankruptcy Trustee?
A bankruptcy trustee must be a licensed insolvency practitioner, and they can be appointed to their position by the courts or by creditors who are seeking to recoup the money owed to them by the bankrupt individual.
In the first instance, an official receiver is appointed to oversee a bankruptcy case. The official receiver is also a licensed insolvency practitioner, and they are appointed when an individual declares bankruptcy. The official receiver is appointed by the court that sanctions the bankruptcy, and they are initially responsible for overseeing all aspects of the bankruptcy.
The bankruptcy trustee is appointed after this, and usually within 12 weeks of bankruptcy being declared. The official receiver is required to call a meeting with creditors, who then have the option of deciding who to appoint as the bankruptcy trustee.
Creditors are allowed to appoint the official receiver as the bankruptcy trustee, or creditors can select their own choice to take over these duties and responsibilities. If the creditors cannot appoint their own choice, then the official receiver can continue as the bankruptcy trustee.
What Are the Responsibilities of a Bankruptcy Trustee?
The bankruptcy trustee has numerous duties, responsibilities and obligations they have to fulfil throughout the bankruptcy process. They will be responsible for the bankruptcy from the moment they are appointed, up until the individual is discharged 12 months later. They may continue to oversee elements of the bankruptcy process beyond this time if the individual isn’t discharged or if assets still need to be sold.
As soon as they are appointed, the bankruptcy trustee takes control of the bankrupt individual’s estate. The bankruptcy trustee also begins dealing directly with creditors, taking over all communication and negotiations. This gives the bankrupt individual valuable breathing space, as well as the expertise of a licensed insolvency practitioner.
During the bankruptcy process, the primary responsibility of the bankruptcy trustee is to help creditors realise the money owed to them. To do this, the bankruptcy trustee will take control of the bankrupt individual’s bank accounts, will investigate their personal financial situation, assess their income and assets, and, where necessary, sell those assets in order to pay debts.
On a practical level, this means that the bankruptcy trustee has the power to seize the bankrupt individual’s car, family home or personal business. They can sell these assets and distribute the profits to creditors. They may also ask the courts to issue an income payment order, whereby part of the individual’s income is also distributed amongst the creditors.
The bankruptcy trustee will also lead negotiations with creditors. While they are responsible for ensuring that creditors get paid, they also need to negotiate credit terms or organise consolidation loans that recognise that the bankrupt individual may not be able to pay everything they owe. If, after 12 months, these debts remain unpaid, they will often be wiped out completely.
To summarise, the major responsibilities of a bankruptcy trustee include:
- Taking control of the bankrupt individual’s estate
- Closing their bank accounts and credit cards
- Investigating assets and income
- Arranging income payment orders
- Selling assets and distributing proceeds
- Renegotiating liabilities with creditors
- Ensuring an undischarged bankrupt follows the terms of their bankruptcy order
What Does a Bankruptcy Trustee Look For?
As part of their responsibilities, a bankruptcy trustee is required to look for certain things throughout a case, to ensure that the bankruptcy is carried out legally and lawfully. To do this, they are allowed to carry out investigations, ask questions and request to see personal documentation and accounts.
For example, the bankruptcy trustee will look to see that the accounts you have provided are comprehensive. They will look to see if you might be hiding any assets or income that could be used to pay creditors, and they will make sure that you are providing the correct details of all bank accounts, both personal and business.
They will want to see that you have provided a truthful account of your finances and assets, and throughout your bankruptcy, they will ensure that you are following the terms and conditions of your bankruptcy order as stipulated by the courts.
Contact Irwin Insolvency Today for More Information on Bankruptcy
If you’re facing financial difficulties, then declaring bankruptcy is just one of the insolvency options available to you.
Before deciding if bankruptcy is the best solution, you should always speak to a licensed insolvency practitioner. Irwin Insolvency’s team of experienced insolvency practitioners can provide the expert advice you need to escape insolvency and get your finances back on track.
Contact our team today to arrange your no-obligation consultation.