that scheme could have been appointed as trustee to
Fred instead of the Official Receiver.
The office of the Official Receiver, being part of the
insolvency service, is an emanation of the state and
therefore subject to the direct application of the Human
Rights Convention. Thus, in Foxleyv United Kingdom
(2000) the Official Receiver had obtained a court order
under s 371 of the Insolvency Act 1986 directing F’s post
to the Official Receiver as trustee in F’s bankruptcy. F
was serving a prison sentence of four years for corrup-
tion. The trustee opened letters and copied them, some
being the subject of legal professional privilege. He was
held to be in breach of Art 8 of the Convention (right
to respect for family life, home and correspondence).
No compensation was awarded but there will no doubt
be more claims against insolvency procedures now that
these claims can be heard, under the Human Rights Act
1998, in UK courts.
3 The transfer of Fred’s property to the control of the
Official Receiver does not apply to such tools, books,
vehicles, and other items of equipment as are necessary
to Fred to be used personally by him in his job as in the
case of a sole trader plumber. Nor does it apply to such
clothing, bedding, furniture, household equipment and
provisions as are necessary for the basic domestic needs
of Fred and his family. These items are retained in Fred’s
ownership and control unless their individual value is
more than the cost of a reasonable replacement. Thus,
very expensive tools and/or household items may have
to be sold to swell Fred’s estate for his creditors and be
replaced by viable but cheaper lines.
4 Fred is required to submit a statement of affairs to the
Official Receiver within 21 days of becoming bankrupt,
i.e. 21 days from the day on which the bankruptcy order
was made. This statement is the starting point of the tak-
ing over of Fred’s affairs by someone else. The statement
will help in this.
5 The main contents of the statement of affairs are:
(a) particulars of Fred’s assets and liabilities;
(b) the names, residences, and occupations of his
creditors;
(c) the securities, if any, held by them, plus the dates on
which these securities were given.
The debtor’s income
There is no reason why Fred should not continue to
receive money from his trade or profession. However,
the trustee may apply to the court for an income pay-
ments orderunder which a specified sum from Fred’s
earnings will be paid to the trustee either by the debtor
or the person making the payment, e.g. in the case of
an author, by the publisher paying a sum from annual
royalties to the trustee. The court will not, however, make
an income payments order if it reduces the debtor’s
income to below the sum regarded by the court as neces-
sary to meet the reasonable needs of the debtor and
his family. In this connection, it was held in Kilvertv
Flackett(1998) that a tax-free lump sum of £50,504 paid
to a bankrupt on retirement was to be regarded as
income and could be made the subject of an income
payments order for the benefit of the creditors of the
estate of the undischarged bankrupt to whom it was
paid.
The Enterprise Act 2002 inserts a new s 310A into
the Insolvency Act 1986. This introduces what are called
income payment agreements. An income payment agree-
ment is a written agreement made between the bankrupt
and the trustee in bankruptcy under which the trustee
can recover from the bankrupt part of his or her post-
bankruptcy earnings without obtaining a court order. The
agreement must specify the amount to be contributed.
This may be a specific sum or a proportion of the
bankrupt’s income. The time period must be stated. A
maximum period of three years from the date of the
agreement is allowed whether or not the bankrupt obtains
his or her discharge in the meantime. Failure by the
bankrupt to comply means that the bankrupt’s auto-
matic discharge will be suspended or the trustee may ask
for an order requiring that the income be paid directly
into the bankrupt’s estate.Credit and other disabilities
Under s 360 of the Insolvency Act 1986 an undischarged
bankrupt is guilty of a criminal offence punishable by a
maximum of two years’ imprisonment or an unlimited
fine if either alone or jointly with any other persons the
bankrupt obtains credit to the extent of £500 or more
without disclosing to the person from whom he obtains
it information about his bankrupt status orif he engages
directly or indirectly in a business, other than the one in
which he was made bankrupt, without disclosing to all
persons with whom he does business, whether they give
him credit or not, the name in which he was made bank-
rupt. Under s 11 of the Company Directors Disqualifica-
tion Act 1986 an undischarged bankrupt commits aPart 2Business organisations