CHAPTER V - EFFECT OF BANKRUPTCY
ON CERTAIN RIGHTS, TRANSACTIONS, ETC.
335A. Rights under trusts of
land
(1) Any application by a trustee of a
bankrupt's estate under section 14 of the
Trusts of Land and Appointment of Trustees
Act 1996 (powers of court in relation to
trusts of land) for an order under that
section for the sale of land shall be made
to the court having jurisdiction in relation
to the bankruptcy.
(2) On such an application the court
shall make such an order as it thinks just
and reasonable having regard to -
(a) the interests of the bankrupt's
creditors;
(b) where the application is made in
respect of land which includes a
dwelling house which is or has been the
home of the bankrupt or the bankrupt's
spouse or former spouse -
(i) the conduct of the spouse or
former spouse, so far as contributing to
the bankruptcy,
(ii) the needs and financial
resources of the spouse or former
spouse, and
(iii) the needs of any children; and
all the circumstances of the case
other than the needs of the bankrupt.
(3) Where such application is made after
the end of the period of one year beginning
with the first vesting under Chapter IV of
this Part of the bankrupt's estate in a
trustee, the court shall assume, unless the
circumstances of the case are exceptional,
that the interests of the bankrupt's
creditors outweigh all other considerations.
(4) The powers conferred on the court by
this section are exercisable on an
application whether it is made before or
after the commencement of this section.
Rights of occupation
336. Rights of occupation etc. of bankrupt's
spouse
(1) Nothing occurring in the initial
period of the bankruptcy (that is to sat,
the period beginning with the day of the
presentation of the petition for the
bankruptcy order and ending with the vesting
of the bankrupt's estate in a trustee) is to
be taken as having given rise to any rights
of occupation under the Matrimonial Homes
Act 1983 in relation to a dwelling house
comprised in the bankrupt's estate.
(2) Where a spouse's rights of occupation
under the Act of 1983 are a charge on the
estate or interest of the other spouse, or
of trustees for the other spouse, and the
spouse is adjudged bankrupt -
(a) the charge continues to subsist
notwithstanding the bankruptcy and,
subject to the provisions of that Act,
binds the trustee of the bankrupt's
estate and persons deriving title under
that trustee, and
(b) any application for an order
under section 1 of that Act shall be
made to the court having jurisdiction in
relation to the bankruptcy.
(3) Where a person and his spouse or
former spouse are trustees for sale of a
dwelling house and that person is adjudged
bankrupt, any application by the trustee of
the bankrupt's estate for an order under
section 30 of the Law of Property Act 1925
(powers of court where trustees for sale
refuse to act) shall be made to the court
having jurisdiction in relation to the
bankruptcy.
(4) On such an application as is
mentioned in subsection (2) or (3) the court
shall make such order under section 1 of the
Act of 1925 as it thinks just and reasonable
having regard to -
(a) the interests of the bankrupt's
creditors,
(b) the conduct of the spouse or
former spouse, so far as contributing to
the bankruptcy,
(c) the needs and financial resources
of the spouse or former spouse,
(d) the needs of any children, and
(e) all the circumstances of the case
other than the needs of the bankrupt.
(5) Where such an application is made
after the end of the period of one year
beginning with the first vesting under
Chapter IV of this Part of the bankrupt's
estate in a trustee, the court shall assume,
unless the circumstances of the case are
exceptional, that the interests of the
bankrupt's creditors outweigh all other
considerations.
337. Rights of occupation of
bankrupt
(1) This section applies where -
(a) a person who is entitled to
occupy a dwelling house by virtue of a
beneficial estate or interest is
adjudged bankrupt, and
(b) any persons under the age of 18
with whom that person had at some time
occupied that dwelling house had their
home with that person at the time when
the bankruptcy petition was presented
and at the commence- ment of the
bankruptcy.
(2) Whether or not the bankrupt's spouse
(if any) has rights of occupation under the
Matrimonial Homes Act 1983 -
(a) the bankrupt has the following
rights as against the trustee of his
estate -
(i) if in occupation, a right not to
be evicted or excluded from the dwelling
house or any part of it, except with the
leave of the court,
(ii) if not in occupation, a right
with the leave of the court to enter
into and occupy the dwelling house, and
(b) the bankrupt's rights are a
charge, having the like priority as an
equitable interest created immediately
before the commencement of the
bankruptcy, on so much of his estate or
interests in the dwelling house as vests
in the trustee.
(3) The Act of 1983 has effect, with the
necessary modifications, as if -
(a) the rights conferred by paragraph
(a) of subsection (2) were rights of
occupation under that Act,
(b) any application for leave such as
is mentioned in that paragraph were an
application for an order under section 1
of that Act, and
(c) any charge under paragraph (b) of
that subsection on the estate or
interest of the trustee were a charge
under that Act on the estate or interest
of a spouse.
(4) Any application for leave such as is
mentioned in subsection (2) (a) or otherwise
by virtue of this section for an order under
section 1 of the Act of 1983 shall be made
to the court having jurisdiction in relation
to the bankruptcy.
(5) On such an application the court
shall make such order under section 1 of the
Act of 1983 as it thinks just and reasonable
having regard to the interests of the
creditors, to the bankrupt's financial
resources, to the needs of the children and
to all the circumstances of the case other
than the needs of the bankrupt.
(6) Where such an application is made
after the end of the period of one year
beginning with the first vesting (under
Chapter IV of this Part) of the bankrupt's
estate in a trustee, the court shall assume,
unless the circumstances of the case are
exceptional , that the interests of the
bankrupt's creditors outweigh all other
considerations.
338. Payments in respect of
premises occupied by bankrupt
Where any premises comprised in a
bankrupt's estate are occupied by him
(whether by virtue of the preceding section
or otherwise) on condition that he makes
payments towards satisfying any liability
arising under a mortgage of the premises or
otherwise towards the outgoings of the
premises, the bankrupt does not, by virtue
of those payments, acquire any interest in
the premises.
Adjustment of prior transactions, etc
339. Transaction at an undervalue
(1) Subject as follows in this section
and section 341 and 342, where an individual
is adjudged bankrupt and he has at a
relevant time (defined in section 341)
entered into a transaction with any person
at an undervalue, the trustee of the
bankrupt's estate may apply to the court for
an order under this section.
(2) The court shall, on such an
application, make such order as it thinks
fir for restoring the position to what it
would have been if that individual had not
entered into that transaction.
(3) For the purposes of this section and
sections 341 and 342, an individual enters
into a transaction with a person at an
undervalue if -
(a) he makes a gift to that person or
he otherwise enters into a transaction
with that person on terms that provide
for him to receive no consideration.
(b) he enters into a transaction with
that person in consideration of
marriage, or
(c) he enters into a transaction with
that person for a consideration the
value of which, in money or money's
worth, is significantly less than the
value, in money or money's worth, of the
consideration provided by the
individual.
340. Preferences
(1) Subject as follows in this and the
next two sections, where an individual is
adjudged bankrupt and he has a relevant time
(defined in section 341) given a preference
to any person, the trustee of the bankrupt's
estate may apply to the court for an order
under this section.
(2) The court shall, on such an
application, make such order as it thinks
fit for restoring the position to what it
would have been if that individual had not
given that preference.
(3) For the purposes of this and the next
sections, an individual gives a preference
to a person if -
(a) that person is one of the
individual's creditors or a surety or
guarantor for any of his debts or other
liabilities,
(b) the individual does anything or
suffers anything to be done which (in
either case) has the effect of putting
that person into a position which, in
the event of the individual's
bankruptcy, will be better than the
position he would have been in if that
thing had not been done.
(4) The court shall not make an order
under this section in respect of a
preference given to any person unless the
individual who gave the preference was
influenced in deciding to give it by a
desire to produce in relation to that person
the effect mentioned in sub- section (3)(b)
above.
(5) An individual who has given a
preference to a person who, at the time the
preference was given, was an associate of
his (otherwise than by reason only of being
his employee) is presumed, unless the
contrary is shown, to have been influenced
in deciding to give it by such a desire as
is mentioned in subsection (4).
(6) The fact that something has been done
in pursuance of the order of a court does
not, without more, prevent the doing or
suffering of that thing from constituting
the giving of a preference.
341. "Relevant time" under
sections 339, 340
(1) Subject as follows, the time at which
an individual enters into a transaction at
an undervalue or gives a preference is a
relevant time if the transaction is entered
into or the preference given -
(a) in the case of a transaction at
an undervalue, at a time in the period
of 5 years ending wit the day of the
presentation of the bankruptcy petition
on which the individual is adjudged
bankrupt.
(b) in the case of a preference which
is not a transaction at an undervalue
and is given to a person sho is an
associate of the individual (otherwise
than by reason only of being his
employee), at a time in the period of 2
years ending with that day, and
(c) in any other case of a preference
which is not a transaction at an
undervalue, at a time in the period of 6
months ending with that day.
(2) Where an individual enters into a
transaction at an undervalue or gives a
preference at a time mentioned in paragraph
(a), (b) or of subsection (1) (not being, in
the case of a transaction at an undervalue,
a time less than 2 years before the end of
the period mentioned in paragraph (a), that
time is not a relevant time for the purposes
of sections 339 and 340 unless the
individual -
(a) is insolvent at that time, or
(b) becomes insolvent in consequence
of the transaction or preference;
but the requirements of this
subsection are presumed to be satisfied,
unless the contrary is shown, in
relation to any transaction at an
undervalue which is entered into by an
individual with a person who is an
associate of his (otherwise than by
reason only of being his employee).
(3) For the purposes of subsection (2),
an individual is insolvent if -
(a) he is unable to pay his debts as
they fall due, or
(b) the value of his assets is less
than the amount of his liabilities,
taking into account his contingent and
prospective liabilities.
(4) A transaction entered into or
preference given by a person who is
subsequently adjudged bankrupt on a petition
under section 264(1)(d) criminal bankruptcy)
is to be treated as having been entered into
or given at a relevant time for the purposes
of sections 339 and 340 if it was entered
into or given at any time on or after the
date specified for the purposes of this
subsection in the criminal bankruptcy order
on which the petition was based.
(5) No order shall be made under section
339 or 340 by virtue of subsection (4) of
this section where an appeal is pending
(within the meaning of section 277) against
the individual's conviction of any offence
by virtue of which the criminal bankruptcy
order was made.
346. Enforcements procedures
(1) Subject to section 285 in Chapter II
(restrictions on proceedings and remedies) and
to the following provisions of this section,
where the creditor of any person who is adjudged
bankrupt has, before the commencement of that
bankruptcy -
(a) issued execution against the goods or
land of that person, or
(b) attached a debt due to that person
from another person, that creditor is not
entitled, as against the official receiver
or trustee of the bankrupt's estate, to
retain the benefit of the execution or
attachment, or any sums paid to avoid it,
unless the execution or attachment was
completed, or the sums were paid, before the
commencement of the bankruptcy.
(2) Subject as follows, where any goods of a
person have been taken in execution, then, if
before the completion of the execution notice is
given to the sheriff or other officer charged
with the execution that that person has been
adjudged bankrupt -
(a) the sheriff or other officer shall
request deliver to the official receiver or
trustee of the bankrupt's estate the goods
and any money seized or recovered in part
satisfaction of the execution, but
(b) the costs of the execution are a
first charge on the goods or money so
delivered and the official receiver or
trustee may sell the goods or a sufficient
part of them for the purpose of satisfying
the charge.
(3) Subject to subsection (6) below, where -
(a) under an execution in respect of a
judgment for a sum exceeding such sum as may
be prescribed for the purposes of this
subsection, the goods of any person are sold
or money is paid in order to avoid a sale,
and
(b) before the end of the period of 14
days beginning with the day of the sale or
payment the sheriff or other officer charged
with the execution is given notice that a
bankruptcy petition has been presented in
relation to that person, and
(c) a bankruptcy order is or has been
made on that petition,
the balance of the proceeds of sale or
money paid, after deducting the costs of
execution, shall (in priority to the claim
of the execution creditor) be comprised in
the bankrupt's estate.
(4) Accordingly, in the case of an execution
in respect of a judgment for a sum exceeding the
sum prescribed for the purposes of subsection
(3), the sheriff or other officer charged with
the execution -
(a) shall not dispose of the balance
mentioned in subsection (3) at any time
within the period of 14 days so mentioned or
while there is pending a bankruptcy petition
of which he has been given notice under that
subsection, and
(b) shall pay that balance, where by
virtue of that subsection it is comprised in
the bankrupt's estate, to the official
receiver or (if there is one) to the trustee
of that estate.
(5) For the purposes of this section -
(a) an execution against goods is
completed by seizure and sale or by the
making of a charging order under section 1
of the Charging Orders Act 1979;
(b) an execution against land is
completed by seizure, by the appointment of
a receiver or by the making of a charging
order under that section;
(c) an attachment of a debt is completed
by the receipt of the debt.
(6) The rights conferred by subsections (1)
to (3) on the official receiver or the trustee
may, to such extent and on such terms as it
thinks fit, be set aside by the court in favour
of the creditor who has issued the execution or
attached the debt.
(7) Nothing in this section entitles the
trustee of a bankrupt's estate to claim goods
from a person who has acquired them in good
faith under a sale by a sheriff or other officer
charged with an execution.
(8) Neither subsection (2) nor subsection (3)
applies in relation to any execution against
property which has been acquired by or has
devolved upon the bankrupt since the
commencement of the bankruptcy, unless, at the
time the execution is issued or before it is
completed -
(a) the property has been or is claimed
for the bankrupt's estate under section 307
(after-acquired property), and
(b) a copy of the notice given under that
section has been or is served on the sheriff
or other officer charged with the execution.
347. Distress, etc
(1) The right of any landlord or other person
to whom rent is payable to distrain upon the
goods and effects of an undischarged bankrupt
for rent due to him from the bankrupt is
available (subject to subsection (5) below)
against goods and effects comprised in the
bankrupt's estate, but only for 6 months' rent
accrued due before the commencement of the
bankruptcy.
(2) Where a landlord or other person to whom
rent is payable has distrained for rent upon the
goods and effects of an individual to whom a
bankruptcy petition relates and a bankruptcy
order is subsequently made on that petition, any
amount recovered by way of that distress which -
(a) is in excess of the amount which by
virtue of subsection (1) would have been
recoverable after the commencement of the
bankruptcy, or
(b) is in respect of rent for a period or
part of a period after the distress was
levied,
shall be held for the bankrupt as part of
his estate.
(3) Where any person (whether or not a
landlord or person entitled to rent) has
distrained upon the goods or effects of an
indivdual who is adjudged bankrupt before the
end of the period of 3 months beginning with the
distraint, so much of those goods or effects, or
the proceeds of their sale, as is not held for
the bankrupt under subsection (2) shall be
charged for the benefit of the bankrupt's estate
with the preferential debts of the bankrupt to
the extent that the bankrupt's estate is for the
time being insufficient for meeting those debts.
(4) Where by virtue of any charge under
subsection (3) any person surrenders any goods
or effects to the trustee of a bankrupt's estate
or makes a payment to such a trustee, that
person ranks, in respect of the amount of the
proceeds of the sale of those goods or effects
by the trustee or, as the case may be, the
amount of payment, as a preferential creditor of
the bankrupt, except as against so much of the
bankrupt's estate as is available for the
payment of preferential creditors by virtue of
the surrender of payment.
(5) A landlord or other person to whom rent
is payable is not at any time after the
discharge of a bankrupt entitled to distrain
upon any goods of effects comprised in the
bankrupt's estate.
(6) Where in the case of any execution -
(a) a landlord is (apart from this
section) entitled under section 1 of the
Landlord and Tenant Act 1709 or section 102
of the County Courts Act 1984 (claims for
rent where goods seized in execution) to
claim for an amount not exceeding one year's
rent, and
(b) the person against whom the execution
is levied is adjudged bankrupt before the
notice of claim is served on the sheriff or
other officer charged with the execution,
the right of the landlord to claim under
that section is restricted to a right of
claim for an amount not exceeding 6 months'
rent and does not extend to any rent payable
in respect of a period after the notice of
claim is so served.
(7) Nothing in subsection (6) imposes any
liability on a sheriff or other officer charged
with an execution to account to the official
receiver or the trustee of a bankrupt's estate
for any sums paid by him to a landlord at any
time before the sheriff or other officer was
served with notice of the bankruptcy order in
question.
But this subsection is without prejudice to
the liability of the landlord.
(8) Nothing in this Group of Parts affdects
any right to distrain otherwise than for rent;
and any such reight is at any time exercisable
without restriction against property comprised
in a bankrupt's estate, even if that right is
expressed by any enactment to be exercisable in
like manner as a right to distrain for rent.
(9) Any right to distrain against property
comprised in a bankrupt's estate is exercisable
notwithstanding that the property has vested in
the trustee.
(10) The provisions of this section are
without prejudice to a landlord's right in a
bankruptcy to prove for any bankruptcy debt in
respect of rent.
348. Apprenticeships, etc
(1) This section applies where -
(a) a bankruptcy order is made in respect
of an individual to whom another individual
was an apprentice or articled clerk at the
time when the petition on which the order
was presented, and
(b) the bankrupt or the apprentice or
clerk gived notice to the trustee
terminating the apprenticeship or articles.
(2) Subject to subsection (6) below, the
indnture of apprenticeship or, as the case may
be, the articles of agreement shall be
discharged with effect from the commencement of
the bankruptcy.
(3) If any money has been paid by or on
behalf of the apprentice or clerk to the
bankrupt as a fee, the trustee may, on an
application made by or on behalf of the
apprentice or clerk, pay such sum to the
apprentice or clerk as the trustee thinks
reasonable, having regard to -
(a) the amount of the fee,
(b) the proportion of the period in
respect of which the fee was paid that has
been served by the apprentice or clerk
before the commencement of the bankruptcy,
and
(c) the other circumstances of the case.
(4) The power of the trustee to make a
payment under subsection (3) has priority over
his obligation to distribute the bankrupt's
estate.
(5) Instead of making a payment under
subsection (3), the trustee may, if it appears
to him expedient to do so on an application made
by or on behalf of the apprentice or clerk,
transfer the indenture or articles to a person
other than the bankrupt.
(6) Where a transfer is made under subsection
(5), subsection (2) has effect only as between
the apprentice or clerk and the bankrupt.
349. Unenforceability of liens on
books, etc
(1) Subject as follows, a lien or other right
to retain possession of any of the books, papers
or other records of a bankrupt is unenforceable
to the extent that ir enforcement would deny
possession of any books, papers or other records
to the official receiver or the trustee of the
bankrupt's estate.
(2) Subsection (1) does not apply to a lien
on documents which give a title to property and
are held as such.
349A. Arbitration agreements to
which bankrupt is party
(1) This section applies where a bankrupt had
become party to a contract containing an
arbitration agreement before the commencement of
his bankruptcy.
(2) If the trustee in bankruptcy adopts the
contract, the arbitration agreement is
enforceable by or against the trustee in
relation to matters arising from or connected
with the contract.
(3) If the trustee in bankruptcy does not
adopt the contract and a matter to which the
arbitration agreement applies requires to be
determined in connection with or for the
purposes of the bankruptcy proceedings -
(a) the trustee with the consent of the
creditors' committeee, or
(b) any other party to the agreement,
may apply to the court which may, if it
thinks fit in all the circumstancesa of the
case, order that the matter be referred to
arbitration in accordance with the
arbitration agreement.
(4) In this section -
"arbitration agreement" has the same meaning
as in Part I of the Arbitration Act 1996; and
"the court" means the court which has
jurisdiction in the bankruptcy proceedings.
The above is the actual text of the
Insolvency Act 1986.
For more information please visit: Her
Majesty's Stationery Office.
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