Possession proceedings against a bankrupt tenant
If the tenant is bankrupt, the possession proceedings can continue but there are restrictions on the rent that the landlord can recover.
Key information on bankruptcy
Bankruptcy is an insolvency measure for individuals unable to pay their debts when they become due.
A person can become bankrupt if either:
the debtor has applied to make themselves bankrupt
a creditor has petitioned and more than £5000 is owed
There is no limit on the number or sum of the debts that can be included in bankruptcy. For the debtor’s application to be approved, the applicant must be insolvent (meaning their assets do not exceed their debts).
Bankruptcy normally lasts for 12 months, unless the Official Receiver applies to court to extend it. Discharge from bankruptcy ends the liability for all debts that were included in it, apart from those obtained by fraud. Some debts, such as court fines and child maintenance payments, are not included in bankruptcy. The categories of excluded debts are contained in s.281 Insolvency Act 196.
More information about bankruptcy is available from the Insolvency Service Guide to Bankruptcy.
Remedies and restrictions against the bankrupt tenant
While a tenant is bankrupt there are restrictions on proceedings and remedies that can be taken against their property.
No creditor in respect of a 'debt provable in the bankruptcy' shall, without the leave of the court:
have any remedy against the property or person of the bankrupt in respect of that debt, or
start any action or other legal proceedings against them
These restrictions apply in respect of any of the tenant's property. For this purpose, property includes money, goods, land in the UK or elsewhere, and rights and liabilities over property. A residential tenancy is the property of the bankrupt.
The above restrictions do not affect the right of mortgage lenders or other secured creditors to enforce their security.
Possession proceedings during bankruptcy
Possession proceedings are a claim in respect of the property of a bankrupt tenant, but they are not a remedy in respect of the debt within the meaning of the Insolvency Act 1986. This applies regardless of the tenant's security of tenure.
The landlord of a bankrupt tenant does not require the permission of the court to start or continue possession proceedings, on the ground of rent arrears or any other ground, in order to obtain possession of the property. Where possession is sought on the grounds of non-payment of rent there are restrictions on the jurisdiction of the court to deal with the money side of the landlord's claim for possession.
If the arrears are provable in the bankruptcy (they accrued before the bankruptcy order was made), the court can make an order for possession, but cannot suspend it or postpone it on terms of payment of those arrears. If possession is suspended on terms, the terms are limited to rent only, plus costs. The landlord is unable to obtain a money judgment for those arrears.
If the rent arrears are not provable in the bankruptcy (they accrued after the bankruptcy order was made), the court can suspend or postpone an order for possession on payment of current rent and rent arrears that are not included in the bankruptcy .
What happens to the rent arrears
An implication of the making of a bankruptcy order against a debtor is to freeze all their debts accrued before the bankruptcy order. These provable debts are either repaid to the creditors by the trustee in bankruptcy during the bankruptcy period (usually one year) or written off at the end of it.
Pre-bankruptcy rent arrears
Rent arrears which the tenant owed at the date of the bankruptcy order are debts provable in the bankruptcy. As such, the tenant's landlord is a creditor in the same way as other pre-bankruptcy creditors of the tenant and must claim the arrears from the trustee in bankruptcy.
To avoid the bankrupt losing their tenancy, the Insolvency Service permits payments to rent arrears to be made at a reasonable level. Chapter 35 of the Insolvency Service internal guidance manual states that: 'where the rent with the addition of arrears payments might be considered still reasonable for rent, and allowance should be made reflecting the impact of repossession on the debtor's ability to make a contribution under an IPA. If the payments appear to be excessive, the bankrupt should be asked to attempt to vary the agreement with the landlord'.
Rent arrears in joint tenancies
When the bankrupt tenant is a joint tenant and they are the only tenant declared bankrupt, the landlord can seek to recover all the rent arrears from the non-bankrupt joint tenant(s).
Post-bankruptcy rent arrears
Rent arrears that accrued after the making of the bankruptcy order are not affected by the bankruptcy. The bankrupt tenant is liable to pay rent (and any other debt) accrued after the making of the bankruptcy order. The landlord can deal directly with the tenant and take recovery action, including the possibility of possession proceedings.
Role of the trustee in bankruptcy
The bankrupt's estate vests automatically in the trustee in bankruptcy on the making of the bankruptcy order and comprises all property belonging to, or vested in, the bankrupt at that moment. The trustee in bankruptcy (either the Official Receiver or an insolvency practitioner) is appointed to realise the interests of the creditors and will manage the bankrupt estate accordingly.
Most types of tenancies created by statute do not vest automatically in the trustee, so the tenant will retain their security of tenure. These include:
assured tenancies, including assured shorthold tenancies
agricultural occupancies with statutory protection
Rent Act protected tenancies.
These tenancies do not usually hold any financial value for the trustee or the creditors. However, the trustee can elect to have these tenancies vested in them by serving a notice on the tenant if the tenancy can be assigned to realise money for the creditors (eg when the landlord of a Rent Act protected tenant offers money to the trustee in return for the possession of the property) or if the trustee wishes to disclaim the tenancy to end it (eg because the rent is very high and places too greater drain on the resources of the bankrupt). It is the contractual element of the tenancy which can vest in the trustee, so a tenancy in the statutory periodic phase cannot be claimed.
It appears that introductory tenancies, demoted tenancies and family intervention tenancies do form part of the bankrupt's estate and therefore vest automatically in the trustee. These tenancies have no financial value for the trustee and the creditors but do place obligations on the trustee, including paying the current rent, and might therefore be disclaimed if the trustee considers that the property brings with it obligations that will make it uneconomical to retain it.
Need for consent of the trustee
There are strict restrictions placed upon the financial dealings of a bankrupt, including the sale and transfer of any property and the payment of debts. If a bankrupt person deals with assets which have vested in the trustee in bankruptcy without their consent, the trustee has a range of powers and can apply to the court for restraint injunctions and warrants of seizure of those assets. In addition, a bankrupt person must fully cooperate with the trustee and disclose all the property comprised in their estate otherwise they could be guilty of bankruptcy offences.
Housing advisers dealing with possession proceedings in relation to bankrupt tenants need to be prepared to deal directly with the trustee, as well as the tenant, and need to allow additional time for possible delays in all procedures.
After discharge of the bankruptcy order
The bankrupt debtor is usually discharged from bankruptcy after one year from the making of the bankruptcy order. The Official Receiver can apply to court to suspend discharge indefinitely, particularly in cases where the bankrupt does not co-operate with the investigations.
The discharge has the effect to release the bankrupt from most of their debts that accrued before the making of the bankruptcy order, except for the following:
secured debts (including mortgages and charging orders
debts incurred through fraud
debts arising from liability to pay damages for negligence, nuisance, breach of a statutory, contractual or other duty
maintenance payments and/or child support payments, including lump sum orders and costs arising from family proceedings
budgeting loans and crisis loans (only for bankruptcy petitions presented on or after 19 March 2012)
The tenant is fully liable for all rent and debts incurred after the making of the bankruptcy order and after discharge.
More information about discharge from bankruptcy is available from the Insolvency Service.
Last updated: 3 March 2021
s.285 Insolvency Act 1986.
s.285(6) Insolvency Act 1986.
s.436 Insolvency Act 1986.
see Ezekiel v Orakpo  QB 260; Knowlsley HT v White  UKHL 70; Harlow DC v Hall  EWCA Civ 156; Sharples v Places for People Homes Ltd: Godfrey v A2 Dominion Homes Ltd  EWCA Civ 813.
285(4) Insolvency Act 1986.
Sharples v Places for People Homes Ltd: Godfrey v A2 Dominion Homes Ltd  EWCA Civ 813.
s.283(1) Insolvency Act 1986.
s.283(3A) Insolvency Act 1986.
s.308 Insolvency Act 1986.
see ss. 363-371 Insolvency Act 1986.
see ss.353-362 Insolvency Act 1986.
s.279 Insolvency Act 1986.