Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Bankruptcy definition

What does Bankruptcy mean? Bankruptcy is the formal insolvency process for individuals who cannot pay their debts. It halts most enforcement, vests the bankrupt’s estate in a trustee, and realises assets and surplus income for creditors until discharge. In England and Wales, under the Insolvency Act 1986, a debtor applies online to the Adjudicator for a bankruptcy order; creditors petition the court. The Official Receiver acts as trustee unless an insolvency practitioner is appointed. Discharge is usually after 12 months; income payment orders/agreements can run up to three years; bankruptcy restrictions orders may extend restrictions. Scotland uses sequestration under the Bankruptcy (Scotland)...

Bankruptcy orders and IVAs: when orders can be made, effects on creditors and assets, and survival of IVA trusts post-failure or completion (England and Wales)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

The gap in the insolvency legislation

There is a notable omission in the drafting of the insolvency regime: it does not expressly state the impact of a Bankruptcy order on an Individual Voluntary Arrangement (IVA). Consequently, the courts have had to determine the resulting effects. The core position is this: once a bankruptcy order is made—whether on a petition by the supervisor or by a creditor bound by the IVA—the IVA terminates. Although not spelt out in the statute, this is inferred from section 276(2) of the Insolvency Act 1986 (IA 1986), which provides that expenses properly incurred in administering the IVA are to be treated as a first charge on the bankrupt’s estate. The courts have acknowledged and applied this implication. This stands in contrast to circumstances where the petition is issued by a creditor who is not bound by the IVA...

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Web page updated on 21/05/2026

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