The trustee in bankruptcy has a duty to creditors to increase the fund available for distribution to them and to do nothing that would diminish the money that is available. This and the following section examine how the trustee is able to fulfil this duty.
A trustee in bankruptcy can disclaim onerous property, such as land burdened with onerous covenants or unprofitable contracts.
A disclaimer ends all the bankrupt's rights and liabilities in respect of the property in question and discharges the trustee from any personal responsibility for that property. Any person who suffers loss as a result of the disclaimer can claim for their loss from the bankrupt's estate.
To prevent a third party from having to wait a long time to find out whether a trustee intends to disclaim, any person who has an interest in property previously owned by the bankrupt is entitled to serve written notice on the trustee requiring them to disclaim the property within 28 days, failing which they lose the power to do so.
Disposals between the date of presentation of the petition and appointment of the trustee in bankruptcy
Any disposition by the bankrupt of their property between the date of the presentation of the petition and the appointment of the trustee in bankruptcy is void unless the court gives its consent or subsequently ratifies that disposition.
If the bankrupt has made a gift or has received consideration significantly lower in value than what they provided in the five year period prior to the petition and if the debtor was insolvent at the time of the transaction or became insolvent as a result of it, the trustee can apply to the court to have such a transaction set aside.
If the transaction took place within two years before the bankruptcy, there is no requirement that the debtor has to be insolvent at the time or as a result of the transaction.
The trustee in bankruptcy can make an application to set aside any 'preference' made within the six months prior to the petition, or within two years prior to the petition if the preference is made in favour of a person connected with the company.
The trustee has to show that the debtor was insolvent at the time or became insolvent as a result of the granting of the preference. An arrangement is a preference if it places a creditor or surety in a position better than that in which they would otherwise have been, and further, that the debtor intended to do this.
Where a transaction has been made at an undervalue for the purpose of making the debtor's property unavailable to pay the creditors, the trustee can apply to have such a transaction set aside.
The provision has no time-limit although the greater the time that has elapsed between the transaction and the bankruptcy, the weaker is the evidence that the purpose of the transaction was to avoid the asset in question being used to pay creditors.