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Amendment made: No. 375, in page 148, line 27, at end insert—
'(c) the Department of Enterprise, Trade and Investment Northern Ireland.'—[Miss Melanie Johnson.]
Clause 208
Amendment made: No. 376, in page 150, line 29, after "Wales" insert "or Northern Ireland".—[Miss Melanie Johnson.]
Clause 210
Amendment made: No. 377, in page 151, line 32, leave out "that subsection" and insert—
'subsection (3) of that section'.—[Miss Melanie Johnson.]
Clause 215
Amendment made: No. 378, in page 156, line 12, leave out subsection (10) and insert—
'(10) A person is an associate of an individual if—
(a) he is the spouse of the individual;
(b) he is a relative of the individual;
(c) he is a relative of the individual's spouse;
(d) he is the spouse of a relative of the individual;
(e) he is the spouse of a relative of the individual's spouse;
(f) he lives in the same household as the individual otherwise than merely because he or the individual is the other's employer, tenant, lodger or boarder;
(g) he is a relative of a person who is an associate of the individual by virtue of paragraph (f);
(h) he has at some time in the past fallen within any of paragraphs (a) to (g).
(11) A person is also an associate of—
(a) an individual with whom he is in partnership;
(b) an individual who is an associate of the individual mentioned in paragraph (a);
(c) a body corporate if he is a controller of it or he is an associate of a person who is a controller of the body corporate.
(12) A body corporate is an associate of another body corporate if—
(a) the same person is a controller of both;
(b) a person is a controller of one and persons who are his associates are controllers of the other;
(c) a person is a controller of one and he and persons who are his associates are controllers of the other;
(d) a group of two or more persons is a controller of each company and the groups consist of the same persons;
(e) a group of two or more persons is a controller of each company and the groups may be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person of whom he is an associate.
(13) A relative is a brother, sister, uncle, aunt, nephew, niece, lineal ancestor or lineal descendant.'—[Miss Melanie Johnson.]
Clause 221
Amendment made: No. 379, in page 158, line 25, at end insert—
'(c) section 7 of the Civil Evidence Act (Northern Ireland) 1971 (c. 36 (N.I.)) (corresponding provision in Northern Ireland).'—[Miss Melanie Johnson.]
New clause 6
'(1) The following shall be inserted after section 283 of the Insolvency Act 1986 (definition of bankrupt's estate)—
"283A Bankrupt's home ceasing to form part of estate
(1) This section applies where property comprised in the bankrupt's estate consists of an interest in a dwelling-house which at the date of the bankruptcy was the bankrupt's sole or principal residence.
(2) At the end of the period of three years beginning with the date of the bankruptcy the interest mentioned in subsection (1) shall—
(a) cease to be comprised in the bankrupt's estate, and
(b) vest in the bankrupt (without conveyance, assignment or transfer).
(3) Subsection (2) shall not apply if during the period mentioned in that subsection—
(a) the trustee realises the interest mentioned in subsection (1),
(b) the trustee applies for an order for sale in respect of the dwelling-house,
(c) the trustee applies for an order for possession of the dwelling-house,
(d) the trustee applies for an order under section 313 in Chapter IV in respect of that interest, or
(e) the trustee and the bankrupt agree that the bankrupt shall incur a specified liability to his estate (with or without the addition of interest from the date of the agreement) in consideration of which the interest mentioned in subsection (1) shall cease to form part of the estate.
(4) Where an application of a kind described in subsection (3)(b) to (d) is made during the period mentioned in subsection (2) and is dismissed, unless the court orders otherwise the interest to which the application relates shall on the dismissal of the application—
(a) cease to be comprised in the bankrupt's estate, and
(b) vest in the bankrupt (without conveyance, assignment or transfer).
(5) If the bankrupt does not inform the trustee or the official receiver of his interest in a property before the end of the period of three months beginning with the date of the bankruptcy, the period of three years mentioned in subsection (2)—
(a) shall not begin with the date of the bankruptcy, but
(b) shall begin with the date on which the trustee or official receiver becomes aware of the bankrupt's interest.
(6) The court may substitute for the period of three years mentioned in subsection (2) a longer period—
(a) in prescribed circumstances, and
(b) in such other circumstances as the court thinks appropriate.
(7) The rules may make provision for this section to have effect with the substitution of a shorter period for the period of three years mentioned in subsection (2) in specified circumstances (which may be described by reference to action to be taken by a trustee in bankruptcy).
(8) The rules may also, in particular, make provision—
(a) requiring or enabling the trustee of a bankrupt's estate to give notice that this section applies or does not apply;
(b) about the effect of a notice under paragraph (a);
(c) requiring the trustee of a bankrupt's estate to make an application to the Chief Land Registrar.
(9) Rules under subsection (8)(b) may, in particular—
(a) disapply this section;
(b) enable a court to disapply this section;
(c) make provision in consequence of a disapplication of this section;
(d) enable a court to make provision in consequence of a disapplication of this section;
(e) make provision (which may include provision conferring jurisdiction on a court or tribunal) about compensation."
(2) Section 313 of the Insolvency Act 1986 (c. 45) (charge on bankrupt's home) shall be amended as follows—
(a) in subsection (2) for ", up to the value from time to time of the property secured," substitute ", up to the charged value from time to time,", and
(b) after subsection (2) insert—
"(2A) In subsection (2) the charged value means—
17 Jun 2002 : Column 43 (a) the amount specified in the charging order as the value of the bankrupt's interest in the property at the date of the order, plus
(b) interest on that amount from the date of the charging order at the prescribed rate.
(2B) In determining the value of an interest for the purposes of this section the court shall disregard any matter which it is required to disregard by the rules."
(3) The following shall be inserted after section 313 of that Act—
"313A Low value home: application for sale, possession or charge
(1) This section applies where—
(a) property comprised in the bankrupt's estate consists of an interest in a dwelling-house which at the date of the bankruptcy was the bankrupt's sole or principal residence, and
(b) the trustee applies for an order for the sale of the property, for an order for possession of the property or for an order under section 313 in respect of the property.
(2) The court shall dismiss the application if the value of the interest is below the amount prescribed for the purposes of this subsection.
(3) In determining the value of an interest for the purposes of this section the court shall disregard any matter which it is required to disregard by the order which prescribes the amount for the purposes of subsection (2)."
(4) The following shall be inserted after section 307(2)(a) of the Insolvency Act 1986 (c. 45) (after-acquired property: exclusions)—
"(aa) any property vesting in the bankrupt by virtue of section 283A in Chapter II,".
(5) In section 384(2) of that Act (prescribed amounts) after "section 273;" insert—
"section 313A;".
(6) In section 418(1) of that Act (monetary limits in bankruptcy) after the entry for section 273 insert—
section 313A (value of property below which application for sale, possession or charge to be dismissed);".
(7) In subsection (8)—
(a) "pre-commencement bankrupt" means an individual who is adjudged bankrupt on a petition presented before subsection (1) above comes into force, and
(b) "the transitional period" is the period of three years beginning with the date on which subsection (1) above comes into force.
(8) If a pre-commencement bankrupt's estate includes an interest in a dwelling-house which at the date of the bankruptcy was his sole or principal residence, at the end of the transitional period that interest shall—
(a) cease to be comprised in the estate, and
(b) vest in the bankrupt (without conveyance, assignment or transfer).
(9) But subsection (8) shall not apply if before or during the transitional period—
(a) any of the events mentioned in section 283A(3) of the Insolvency Act 1986 (c.45) (inserted by subsection (1) above) occurs in relation to the interest or the dwelling–house, or
(b) the trustee obtains any order of a court, or makes any agreement with the bankrupt, in respect of the interest or the dwelling-house.
17 Jun 2002 : Column 44
(10) Section 283A(4) of that Act shall apply to an application made during the transitional period in relation to a pre-commencement bankrupt as it applies to an application made during the period mentioned in section 283A(2).'.—[Miss Melanie Johnson.]
Brought up, and read the First time.
Miss Melanie Johnson: I beg to move, That the clause be read a Second time.
New clause 6 was tabled to fulfil a commitment made in Committee to my hon. Friend the Member for South Ribble (Mr. Borrow), who had tabled his own new clause to deal with situations where the bankrupt's family home remains liable for sale by the trustee, and indeed is sometimes sold by him, long after the bankrupt has been discharged. The current provisions can lead to some harsh outcomes and perceived unfairness, and my hon. Friend mentioned representations from a wide range of organisations—including the Insolvency Practices Council, the Bankruptcy Advisory Service and the Association of Business Recovery Professionals—seeking clarification and a change to the law. The hon. Member for Huntingdon (Mr. Djanogly) also spoke in Committee in favour of change.
My hon. Friend accepted that his new clause may not have been perfectly drafted and withdrew it on our undertaking further to consider the issue of the family home. New clause 6 provides for more equitable treatment of the family home in bankruptcy. The home will continue to vest on bankruptcy in the bankrupt's estate, as it does now, but the clause provides a three-year period during which the trustee must act. If he does not do so, the family home reverts to the bankrupt at the end of that period. The clause provides for extending that period in special circumstances, but that will be the exception rather than the norm.
We believe that all the relevant provisions will result in a much fairer regime. They will provide some certainty to the bankrupt, the trustee and the creditors about the time scale, which is currently open ended, for dealing with the family home. They will create a balance between the interests of the bankrupt and his or her family and the creditors. In a minority of cases, that balance can currently unfairly favour the interests of creditors, and the provisions will help lift the stigma of bankruptcy.
In considering the matter further, we have concluded that those who are bankrupt when the new provisions come into force should also benefit. There seems no sound reason why that should not happen, especially since they feel the unfair effects of the current law. The new clause therefore contains transitional provisions.
The provision is detailed because it deals with a complex subject. Nevertheless, we believe that it will create a reasonable balance between the interests of creditors, by providing ample time for the disposal by the trustee of the bankrupt's interest in his or her sole and principal residence in the most appropriate manner, and those of bankrupts and their dependents, by providing a degree of finality about the time scale in which their interests in their homes will be tackled.
I ask hon. Members to support the new clause.
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