Following the making of a bankruptcy order, the Trustee will seek to ensure that a bankrupt has not done anything that breaches the Insolvency Act 1986 and related legislation. One area regularly investigated is whether, for example, any creditor has been paid shortly before or in anticipation of the bankruptcy order. Particular attention may also be paid to payments made to friends, family and/or close business associates although other creditors will also be considered.
s340 Insolvency Ac 1986 states as follows:-
(1) Subject as follows in this section and the next two sections, where an individual is adjudged bankrupt and he ahs at a relevant time (defined in section341) 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 the 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 two 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, and
(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 that 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 desire to produce in relation to that person the effect mentioned in subsection (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 the court does not, without more, prevent the doing or suffering of that thing from constituting the giving of a preference.
We have extensive experience in opposing claims based on allegations of preferences.
An initial no obligation telephone discussion is free, so why not call or email David Cousen.
T: +44 (0)161 833 0578
E: david.cousen@fdl-law.co.uk
