Trustee in Bankruptcy
If you are declared bankrupt by a court, a licensed insolvency practitioner, or sometimes the Official Receiver, will assume the role of trustee in a bankruptcy situation. This position gives them the legal rights to your property. As a trustee, they are bound to distribute it to your creditors, in order to settle as many of your debts as possible.
You can find out more about the legal background by visiting our debt and insolvency pages.
Role of the trustee
The trustee must be provided with information about your assets and finances and may take investigatory steps if such information is not forthcoming. They are entitled to ask you for evidence to prove your income and outgoings, along with what property you own and what it is used for.
In most cases, the trustee will not conduct a full forensic investigation, only asking for information that they consider necessary. Failing to provide relevant information however, or worse, defrauding the trustee, may be a criminal offence and at the very least may result in restrictions being placed upon you and your bankruptcy being extended.
The trustee will liquidate what assets they can. These will not include your basic necessities, nor the tools of your trade and they will attempt to get a fair price. They will then distribute the proceeds of the sales to the creditors as dividends. The trustee themselves is also entitled to a fee for their work.
The bankruptcy must be recorded by trustee in a sederunt book. This should contain all official documents and court papers, and both you and your creditors have the right to inspect it during the period of the bankruptcy.
The trustee in bankruptcy is a powerful figure and it is important that they do not make avoidable mistakes. They are responsible to the beneficiaries of the trust, that is, your creditors. If the trustee is an insolvency practitioner, the creditors are permitted to elect a commission to oversee the bankruptcy. The trustee will be accountable to the commission.
Ultimately, the trustee is bound by the same duties as any fiduciary. They must exercise reasonable skill, care and judgement in disposing of your assets. If they do not do so, it is possible to bring legal proceedings against them, usually for professional negligence. This is rare however and will certainly require specialist expertise.
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