Bailiff enforcement after bankruptcy? Stop it legally

Bailiffs and Debtors Subject to Bankruptcy and Debt Relief Orders

Effect of bankruptcy and debt relief orders on enforcement

Where a debtor is adjudged bankrupt or is the subject of a Debt Relief Order, a fundamental shift occurs in the legal framework governing enforcement against their goods. The power of enforcement agents to act is severely curtailed by statutory provisions which operate to protect the debtor’s estate for the benefit of the general body of creditors, and to ensure orderly and equitable administration under the supervision of the Official Receiver or, in the case of companies, the liquidator. It is essential that both debtors and enforcement agents understand the precise scope and operation of these legal restrictions in order to avoid unlawful enforcement action, and to preserve the integrity of insolvency proceedings.

Statutory prohibition on enforcement steps after bankruptcy

Once a person is adjudged bankrupt, or a company is subject to a winding-up order, a bailiff must not take any further enforcement steps in relation to that debtor's goods. The applicable legal authority is clear. Section 346 of the Insolvency Act 1986 prohibits execution or other legal process against the property of an individual bankrupt unless leave of the court is obtained, which is rarely granted in ordinary cases. The equivalent provision for companies is found in section 184 of the same Act, which imposes a moratorium on the commencement or continuation of any legal process without the leave of the court once a winding-up order has been made. These provisions ensure that all creditors are treated equitably within the insolvency process, and that no creditor is permitted to gain an unfair advantage through private enforcement.

Effect of CPR 83.20 on bailiff powers

In line with these principles, the Civil Procedure Rules make explicit the effect of insolvency on the powers of enforcement agents. Rule 83.20(1) of the CPR prohibits a bailiff or enforcement agent from taking control of goods or selling them when the debtor is subject to bankruptcy proceedings or a Debt Relief Order. Any such action taken in defiance of this rule is unlawful and of no effect. Should a bailiff nonetheless proceed to sell goods, the proceeds of the sale must be paid over to the Official Receiver in the case of personal bankruptcy under Rule 83.20(3)(c)(i), or to the liquidator where the debtor is a company, under Rule 83.20(3)(c)(ii). The enforcement agent acquires no beneficial title in the proceeds, and is under a statutory duty to account for them.

Payments made by debtors to release goods

Where a debtor, perhaps unaware of the protection afforded by their bankruptcy or DRO, pays a bailiff to recover possession of their goods, that money too must be paid over to the Official Receiver or the liquidator. Rule 83.20(3)(c) makes no distinction between sale proceeds and payments made under duress for the release of goods. The monies belong to the bankruptcy estate and must be treated accordingly. A failure by the enforcement agent to comply with this duty may give rise to a misfeasance claim or an application for a restitutionary remedy. In some cases, a civil action may lie in conversion or for breach of fiduciary duty depending on the circumstances.

Notifying the official receiver and stopping enforcement

Where enforcement agents continue to act in the face of bankruptcy or a Debt Relief Order, the Official Receiver or the liquidator should be notified without delay. Upon being so informed, the Official Receiver may issue a notice pursuant to CPR 83.20(3), confirming that the enforcement power ceases to be exercisable. Paragraph 6(3)(c) of Schedule 12 to the Tribunals Courts and Enforcement Act 2007 reinforces this position by providing that the enforcement power is suspended in such circumstances.

Debts excluded from discharge and enforcement limits

It should be noted that not all debts are discharged upon bankruptcy. Section 281(4) of the Insolvency Act 1986 provides that unpaid court fines are not released on discharge. Similarly, section 281(5)(b) stipulates that obligations arising under child support legislation remain enforceable. The effect of bankruptcy in such cases is limited to suspending enforcement only while the goods of the debtor remain vested in the trustee in bankruptcy, in accordance with section 283 of the 1986 Act.