Role and powers of the trustee in bankruptcy

Trustee in Bankruptcy

The function of the trustee is to get in, realise and then distribute all available assets in the bankrupt’s estate in accordance with the law. In carrying out his functions and in the management of the bankrupt’s estate, the trustee is entitled to exercise his or her own judgment and the court will be slow to interfere with this.

Investigations of the trustee

The trustee will normally need to investigate the bankrupt’s affairs, with a view to ensuring that the creditors receive the returns that are properly due to them – Appointment of Trustee in Bankruptcy.  This duty of investigation includes looking at the circumstances of transactions that occurred before the bankruptcy to see whether any of these transactions are open to challenge and might be set aside or otherwise adjusted for the benefit of the creditors. Such transactions include:

  • Any transactions at an undervalue
  • A preference
  • Excessive pension contributions
  • Extortionate credit bargains
  • Assignment of book debts
  • Transactions defrauding creditors

The purpose of the investigation will be to obtain and consider the evidence in relation to suspect transactions.  If the evidence justifies it, the trustee can apply to the court for an order in relation to each of these situations which may have the effect of restoring the position to what it would have been if the transaction had not taken place or such other order as the court thinks fit.

The trustee’s powers

The trustee in bankruptcy has a wide range of powers including:

  • To carry on the business of the bankrupt for the purpose of winding it up beneficially
  • To bring or defend legal proceedings in relation to any claim by or against the bankrupt
  • To apply to the court for possession and sale of the bankrupt’s home
  • To apply to the court to sell or otherwise deal with property or assets belonging to the bankrupt 

Some of the trustees powers can only be exercised with the sanction of the Secretary of State or, if there is one, the Creditors Committee. The purpose of a Creditors Committee is to oversee the administration of the bankruptcy and it can give approval for certain actions which would otherwise require the permission of the court.

Liability of the trustee

Any act, omission or decision of the trustee is open to challenge by the bankrupt or any creditor of the bankrupt. The court may confirm, reverse or modify the situation or give directions as to what steps should be taken to resolve the situation.

Taking legal advice

There are a number of complex situations which can arise in connection with the discharge of the functions of the trustee and most of these require the application of legal rules and precedent. Our solicitors are happy to advise those affected by those decisions as to their legal rights and what course of action is appropriate.

For more information proceed to Appointment of a trustee in bankruptcy