The recent decision in Bacci v Green reminds us of a number of key principles concerning enforcement and receivership.

Some debts survive bankruptcy  

Bankruptcy doesn’t always draw that all-important line in the sand. In this case, the debts arose from fraud, where a loan was supposed to have been secured on assets that the debtor didn’t actually own.

Because of this, whilst the debt is provable in the bankruptcy, it is not extinguished by it. This allows a creditor to “double-dip”. Seeking a dividend from the bankruptcy, if there is one, and continue to pursue the debtor after discharge.

All assets are up for grabs

It is always important to remember that whilst bankruptcy brings a large number of tools “by default” there are some restrictions too.

In the Bacci case, the individual had significant value in his pension which, under the Welfare Reform and Pensions Act 1999, did not form part of the Bankruptcy estate.

The claimant successfully argued that whilst this debt was excluded from Bankruptcy there was no statutory bar on it being secured for the benefit of a creditor in other proceedings.

You don’t always need a Receiver

Where the assets are complex or require positive actions to realise, a receiver is advised.

However, if all that is required is an instruction to release funds to a third-party – in this case, a drawdown from a pension – then the Court has the power to skip the receiver altogether and simply issue those instructions directly to the third-party.

Clearly, in less complex matters, this provides a cost-saving, and it may be easier to convince the court on proportionality as well.

The Tax is the debtor’s problem

One of the arguments raised by the debtor, in this case, was that he shouldn’t be forced to drawdown his pension as it would crystalise a tax charge.

The court, whilst recognising that this would occur, was not minded to treat this as a reason for rejecting the application.

Final take aways

It is clear from the judgement that the court had a very dim opinion of the debtor. The fact that the debt arose through a proven fraud was a significant factor in the decision it reached, and the methodology still holds true and is worth bearing in mind when considering what the appropriate enforcement action should be.

If you have questions about this determination or would like to know more about the bankruptcy process, please contact us.