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David Barker is our insolvency expert

Excellent service, efficiently dealt with in a timely manner.

David Barker, Head of Insolvency at Winston Solicitors in Leeds
4.94 out of 5
3305 reviews

Insolvency

A person is insolvent if they cannot pay their debts as they fall due and/or because their liabilities are greater than their assets.

A petition for bankruptcy may be made by either:

  • the debtor themselves; or
  • by creditors who are owed more than £5,000 resulting from the debtor’s failure to comply with a court order or statutory demand.

Bankruptcy is the administration of the affairs of an insolvent individual, in the interests of their creditors. On the making of a bankruptcy order, following a bankruptcy petition or a debtor’s application (see above), the Official Receiver (OR) is appointed trustee.

The OR continues as trustee unless or until removed by the court. If there are valuable assets a private sector insolvency practitioner may be appointed trustee.

All assets that comprise the bankrupt’s estate will vest in the trustee subject to certain exceptions (e.g. tools necessary for the bankrupt’s business or domestic or personal items). The trustee’s statutory function is to get in, realise and distribute the bankrupt’s estate in accordance with the Insolvency Act 1986 (“IA 1986”).

This means realising the bankrupt’s assets and distributing the net sale proceeds to the creditors. The trustee’s professional costs are paid out of the bankrupt’s estate.

Automatic discharge from bankruptcy usually occurs after one year. Following discharge, the bankrupt is no longer liable for the balance of his/her debts.

  • After discharge from bankruptcy (usually after one year) the bankrupt is released from his/her bankruptcy debts and any property they acquire after discharge is theirs to keep; the trustee cannot lay claim to it.
  • However, property comprised in his/her estate at the time of the bankruptcy order remains under the control of the trustee.
  • Discharge does not return ownership or control of bankruptcy assets to the bankrupt or prevent the trustee from carrying out any of his remaining functions in relation to the bankrupt’s estate.

Once a bankruptcy order has been made by the court, the trustee is legally entitled to seize all assets in the bankrupt’s possession at the time of the bankruptcy order. His primary aim is to raise money to pay the bankrupt’s creditors.

The bankrupt’s assets are referred to as the “bankrupt’s estate”.

The bankrupt’s estate essentially consists of all the property which belongs to or is vested in the bankrupt at the start of his bankruptcy (i.e. the date on which the bankruptcy order is made). The IA 1986 defines the bankrupt’s estate as follows:

Section 283(1)

  1. all property belonging to or vested in the bankrupt at the commencement of the bankruptcy; or
  2. any property which is or is treated as being comprised in the estate by virtue of the provisions of the Act which relate to the insolvency of individuals.

Under insolvency legislation, the term “property” is very defined widely. It includes money, goods, things in action, and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property.

In addition to assets that are readily available, the trustee may also lay claim to “after-acquired property”, that is property acquired after the date of the bankruptcy order but before the date of discharge. (For example, the court may order that part of the bankrupt’s income from employment should be paid to the trustee.)

The trustee may also claim any “future and contingent interests” the bankrupt may hold (i.e. an interest which is uncertain, either as to the person who will enjoy it in possession or as to the event on which it will arise), provided they exist as “proprietary interests” at the date of the bankruptcy. (For example, an interest in a life policy.)

If the bankrupt has a “beneficial interest” in a property, whether freehold or leasehold (i.e. an interest in the proceeds of sale of the property) this interest will generally pass to the trustee for the benefit of the creditors. If the bankrupt jointly owns the property (perhaps with a spouse or partner) the beneficial interest is usually an equal share of the value (unless specified otherwise in the original conveyance or transfer document).  If the property has been mortgaged, the mortgage company has first claim on any proceeds of sale. Therefore, the bankrupt’s beneficial interest is calculated after deducting any loans secured against the property. In effect, the property passes to the trustee subject to the mortgagee’s interest and subject to the mortgagee’s right to take possession even after the bankruptcy and to exercise all the other rights of a mortgagee (including the right of sale)

Therefore the trustee will realise the bankrupts interest for the benefit of creditors even if the bankrupt becomes homeless as a result.

Should you require legal assistance for dealing with bankruptcy please call us on 0113 218 5423 or email at @email.

Client feedback

Absolutely exceptional service from start to finish. I will definitely be recommending you to others. Michelle was fantastic and eased me through the whole process. I had so many questions as a first time buyer, Michelle answered them all and responded quickly every time. Very happy - August 2025
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We are greatful for Sam's and her team work. We don't believe buying or selling a house could be made any easier. Thank you! - August 2025
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Was recommended by my Financial Advisor and was pleasantly surprised everything was dealt with efficiently and everyone I spoke to were kind courteous and knowledgeable I would have no hesitation in using their services again. - August 2025
J Gilbertson, Pontefract
When Mum needed the system most that she had been paying into all her life she was failed by countless people and departments, assessments not completed, lost files, appointments not kept, delay after delay and on. I had a gut feeling that procedures weren't being followed and began my quest for the truth in her memory. I found James at 'Winston Solicitors' who helped us take on the system and prove that Mum was indeed entitled to CHC Funding. Throughout the case he was relentless in his pursuit to seek out the truth and hold those accountable who failed Mum. He gave us regular updates and discussed every step with us along the way, I cannot recommend him highly enough to anyone who has found themselves in this dreadful position in traumatic times with their loved ones. - August 2025
A Ellis, Manchester
Sam and the team have been great in the sale and purchase of my house. Consistent communication and always on hand to answer any questions.
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Mr and Mrs Watson
We were delighted with the service we received at Winston Solicitors. Their conveyancing team, in particular Sidraa and Tom were very professional, kept us updated with the progress of the sale and responded promptly to our questions. We also used the expertise of other members of the legal team; Monika gave excellent guidance regarding a family trust and the reception team were friendly and efficient.
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