My Bankruptcy trustee is demanding more money - what can I do?

The College of Law on issues surrounding joint ownership of property

I was made bankrupt in 2004. At the time the debts stated on my form came to £22,000 but after advertising there were a further £9,000 of debts adjudicated by the trustee in Bankruptcy. Restrictions were placed on my house. We proceeded with the Bankruptcy and I paid the trustee whatever I could. Eventually in March 2007 I received a letter from the trustee stating that the Trustee would be happy to accept the sum of £32,000 in full settlement of his interest. It went on to say that once the funds were cleared it would take only a further two weeks to remove the restriction on my house. I paid them the amount demanded and two weeks went by but I then received a new letter saying that there had been a mistake in the original calculation (by an officer who has since left) and that the true figure required for settlement was £92,000. I have since received threatening letters demanding the extra £60,000 failing which the trustee will repossess my house. What is my position?

Bankruptcy proceedings are complicated and you should obtain specialist legal advice before responding. Since ultimately the trustee is answerable to the Court the Insolvency Act section 303 enables you to apply to the Court for directions where you are dissatisfied with any decision of the trustee and this might be the best course of action. The trustee cannot, in any event, repossess your home without a court order. You are entitled to have access to the trustee’s accounts and other documents to see how the figures were arrived at.

In the absence of all the background facts it is impossible to give a conclusive answer to your query. What follows are some considerations that may be relevant.

1.Bankruptcy order. I presume that this has been discharged without any further Bankruptcy Restriction Order (BRO). Following changes introduced in 2004, you would normally have been discharged from Bankruptcy one year after the original Bankruptcy order. The court has power to impose further restrictions under a BRO but very few of these have been imposed (although a certain number of undertakings have been accepted in their place).

More volunteer for Bankruptcy as going bust loses its stigma

There is increasing evidence that going bankrupt is losing its stigma as consumers struggle with mounting debts.

Three quarters of all people who petitioned for Bankruptcy last year did so voluntarily, new figures show. While overall Bankruptcy petitions fell slightly last year, figures from the Ministry of Justice released yesterday showed more people initiating proceedings. Some 53,114 people petitioned in court to become bankrupt in 2007, up from 52,717 in 2006.

Vince Cable, Liberal Democrat Treasury spokesman, said: “These figures are clear evidence that more and more people are finding it impossible to keep up with repayments on their growing debts. For many people it seems that voluntarily filing for Bankruptcy is the only way to shed debts they simply cannot pay. As the credit crunch further impacts on the cost of borrowing, we need to wake up to the very real possibility of mass Bankruptcy and repossession across the country.”

The new figures come just two weeks after Insolvency Service data showed that the number of people declared insolvent fell for the first time in nine years during 2007. While the number of bankruptcies rose, the number of people entering into an individual voluntary arrangement (IVA) fell sharply.