Bankruptcy Restrictions Order
If the Official Receiver considers you have been blameworthy and/or reckless in contributing to your bankruptcy, or are attempting to hide assets, an application to the court for a Bankruptcy Restriction order can be made.
The most common reasons for a bankruptcy restriction order are:-
- Incurring a debt with no reasonable expectation of being able to pay.
This includes increasing debt on credit cards.
- Gambling or unreasonable extravagance which contributed to the bankruptcy.
- Entering into a transaction at an undervalue.
This means giving away items, or selling them at less than their true value. It is a myth that your can give away your possessions just before bankruptcy in an attempt to exclude them. Any transaction can be reversed upon court order.
- Failing to account satisfactorily for a loss of property to meet debts.
If you sell a property up to 2 years before the bankruptcy order, you must be able to account for the monies.
- Entering into a preference.
Making payments to some creditors in preference to others. You are not allowed to repay debts to friends / family members, while ignoring debts to other lenders.
- Fraud or fraudulent breach of trust.
This usually refers debts resulting from stolen money from an employer etc and can also lead to a prison sentence.
Other reasons for a Bankruptcy Restriction Order are:-
- Making excessive pension contributions.
- Failing to supply goods that have been either completely or partly paid for, which gave rise to a claim provable in the bankruptcy.
- Neglecting business affairs which either were the cause of the bankruptcy, or made the extent of the bankruptcy worse.
- Being been made bankrupt on a separate occasion in the past 6 years.
- General lack of co-operation with the Official Receiver.
If before bankruptcy, you sell your interest in any asset to anyone for less than its true worth, the Trustee may apply to the court for an order to reverse the sale. This can be considered ‘unfit behaviour’ and may result in a bankruptcy restriction order.
This can apply to any asset, even if it was innocently given as a Christmas present to a spouse.
In short, you just can not give stuff away in the hope this hides it from your creditors and excludes it from the bankruptcy.
The Trustee can apply to the court to have the transaction reverse if either of the following are true.
- The transaction was performed up to 5 years before the bankruptcy, and you were insolvent at the time.
- The transaction was performed up to 2 years before bankruptcy.
Bankruptcy Restriction Undertaking
A Bankruptcy Restriction Undertaking (BRU) is like a BRO, but is an agreement with the Trustee without involving the court. A BRU comes about when you accept the allegations made by the Trustee about your conduct. Due to the ‘guilty plea’, the duration of the BRU is often shorter than if it were a court imposed BRO.
Effects of a BRO/BRU.
A Bankruptcy Restriction Order or Undertaking lasts for between 2 and 15 years.
A BRO extends normal bankruptcy restrictions by the length of the order. Additionally, someone subject to a BRO may not:
- Be an Member of Parliament, National assembly or take up their seat in the House of Lords
- Purchase their council home.
- Be or act as a School Governor.
Breech of the any bankruptcy restrictions is an offense and can lead to criminal proceedings.
Bankruptcy Restriction Order are Public Record
See latest bankruptcy restriction orders – These are real cases displayed on the Government’s Insolvency Service website.
What To Do Next
If you are considering Bankruptcy, but are worried you may be subject to a Bankruptcy Restriction Order , then CALL US or submit the INSTANT ADVICE form for Immediate Free Advice.
It is possible an IVA could save your from wrath of your Creditors, the Official Receiver and from a full judicial enquiry into your finances.