What Is A Bankruptcy Restriction Order?

A Bankruptcy Restriction Order arises when an individual who is subjected to a bankruptcy order is deemed because of unfit conduct to be unsuitable to be free of the conditions the bankruptcy imposes on them.

Bankruptcy restrictions can be effected as a Bankruptcy Restriction Order in which case a Court may make such an order at the request of the government civil servant at the Insolvency Service, called the Official Receiver. Alternatively, the restrictions can come about by agreement between the bankrupt and the Official Receiver through what is known as a Bankruptcy Restriction Undertaking (“BRU”). The effect is more or less the same but a BRU tends to be quicker and cheaper to put in place because it does not involve a contested court hearing.

In effect a Bankruptcy Restriction Order is for individuals whose conduct is deemed unfit, what Director Disqualification Proceedings that result in a Disqualification Order is for company directors. In both instances such regimes operate to protect the public for a period of time. 

Why Would A Bankrupt Have Conditions Placed On Them?

A bankrupt would be restricted from coming out of bankruptcy if their conduct typically involved improper dealings with their assets or causing avoidable loss to creditors. It can arise due to obtaining credit by deception, borrowing money they could not afford to repay, paying certain creditors ahead of others such as family members or a failure to cooperate with the Official Receiver whilst they are investigating a bankrupt’s financial affairs.

A notable feature of conduct that lends itself to the prospect of a bankrupt being considered by the Official Receiver for a Bankruptcy Restriction Order is that involving dishonesty.

What Restrictions Will Arise?

If an individual is under a Bankruptcy Restriction Order they are not able to:

• Be or operate as a company director
• Trade a business under a different name without telling people they were made bankrupt
• Seek to borrow more than £500 without saying that they are subject to bankruptcy restrictions
• be a charity trustee
• be a pension scheme trustee
• be a school governor and or have certain roles in the education system
• have certain roles in the health system
• have certain roles in certain public authorities

Public Registration Of A Bankruptcy Restriction Order

A Bankruptcy Restriction Order is a matter of public record. The Insolvency Service details this information in the Individual Insolvency Register. 

Breaking The Restrictions

If a bankrupt who is under a Bankruptcy Restriction Order acts contrary to the restrictions they are under then they can be prosecuted. Acting against the terms of a Court order is a serious matter and it is quite conceivable the authorities will take stern and effective action to address such matters so the integrity of the bankruptcy restriction regime is maintained.

In addition their Bankruptcy Restriction Order can be extended for a longer period of time.

Can The Restrictions Order Be Contested?

It is possible for an application for a Bankruptcy Restriction Order by the Insolvency Service to be contested if a bankrupt does not accept that allegations of unfit conduct have arisen. 

The Official Receiver is the party that has to convince the Court the conduct is such that it merits restrictions being imposed on the bankrupt.

If there is doubt about suggestions made that might lead to restrictions being imposed then it may be wise for such a person to obtain advice from an Insolvency Practitioner.