Tribunals, Courts and Enforcement Bill [HL]

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Session 2006 - 07
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Tribunals, Courts and Enforcement Bill [HL]

Tribunals, Courts and Enforcement Bill [HL]
Schedule 19 — Schedule 4ZB to the Insolvency Act 1986
279

Schedule 19
Section 103(2)

Schedule 4ZB to the Insolvency Act 1986
“Schedule 4ZB
Debt relief restrictions orders and undertakings
Debt relief restrictions order
5
1     (1)
A debt relief restrictions order may be made by the court in
relation to a person in respect of whom a debt relief order has been
made.
      (2)
An order may be made only on the application of—
(a)
the Secretary of State, or
10
(b)
the official receiver acting on a direction of the Secretary of
State.
Grounds for making order
2     (1)
The court shall grant an application for a debt relief restrictions
order if it thinks it appropriate to do so having regard to the
15
conduct of the debtor (whether before or after the making of the
debt relief order).
      (2)
The court shall, in particular, take into account any of the
following kinds of behaviour on the part of the debtor—
(a)
failing to keep records which account for a loss of property
20
by the debtor, or by a business carried on by him, where
the loss occurred in the period beginning two years before
the application date for the debt relief order and ending
with the date of the application for the debt relief
restrictions order;
25
(b)
failing to produce records of that kind on demand by the
official receiver;
(c)
entering into a transaction at an undervalue in the period
beginning two years before the application date for the
debt relief order and ending with the date of the
30
determination of that application;
(d)
giving a preference in the period beginning two years
before the application date for the debt relief order and
ending with the date of the determination of that
application;
35
(e)
making an excessive pension contribution;
(f)
a failure to supply goods or services that were wholly or
partly paid for;
(g)
trading at a time, before the date of the determination of
the application for the debt relief order, when the debtor
40
knew or ought to have known that he was himself to be
unable to pay his debts;
(h)
incurring, before the date of the determination of the
application for the debt relief order, a debt which the
debtor had no reasonable expectation of being able to pay;
45

Tribunals, Courts and Enforcement Bill [HL]
Schedule 19 — Schedule 4ZB to the Insolvency Act 1986
280

(i)
failing to account satisfactorily to the court or the official
receiver for a loss of property or for an insufficiency of
property to meet his debts;
(j)
carrying on any gambling, rash and hazardous speculation
or unreasonable extravagance which may have materially
5
contributed to or increased the extent of his inability to pay
his debts before the application date for the debt relief
order or which took place between that date and the date
of the determination of the application for the debt relief
order;
10
(k)
neglect of business affairs of a kind which may have
materially contributed to or increased the extent of his
inability to pay his debts;
(l)
fraud or fraudulent breach of trust;
(m)
failing to co-operate with the official receiver.
15
      (3)
The court shall also, in particular, consider whether the debtor was
an undischarged bankrupt at some time during the period of six
years ending with the date of the application for the debt relief
order.
      (4)
For the purposes of sub-paragraph (2)—
20
“excessive pension contribution” shall be construed in
accordance with section 342A;
“preference” shall be construed in accordance with
paragraph 10(2) of Schedule 4ZA;
“undervalue” shall be construed in accordance with
25
paragraph 9(2) of that Schedule.
Timing of application for order
3
An application for a debt relief restrictions order in respect of a
debtor may be made—
(a)
at any time during the moratorium period relating to the
30
debt relief order in question, or
(b)
after the end of that period, but only with the permission
of the court.
Duration of order
4     (1)
A debt relief restrictions order—
35
(a)
comes into force when it is made, and
(b)
ceases to have effect at the end of a date specified in the
order.
      (2)
The date specified in a debt relief restrictions order under sub-
paragraph (1)(b) must not be—
40
(a)
before the end of the period of two years beginning with
the date on which the order is made, or
(b)
after the end of the period of 15 years beginning with that
date.

Tribunals, Courts and Enforcement Bill [HL]
Schedule 19 — Schedule 4ZB to the Insolvency Act 1986
281

Interim debt relief restrictions order
5     (1)
This paragraph applies at any time between—
(a)
the institution of an application for a debt relief restrictions
order, and
(b)
the determination of the application.
5
      (2)
The court may make an interim debt relief restrictions order if the
court thinks that—
(a)
there are prima facie grounds to suggest that the
application for the debt relief restrictions order will be
successful, and
10
(b)
it is in the public interest to make an interim debt relief
restrictions order.
      (3)
An interim debt relief restrictions order may only be made on the
application of—
(a)
the Secretary of State, or
15
(b)
the official receiver acting on a direction of the Secretary of
State.
      (4)
An interim debt relief restrictions order—
(a)
has the same effect as a debt relief restrictions order, and
(b)
comes into force when it is made.
20
      (5)
An interim debt relief restrictions order ceases to have effect—
(a)
on the determination of the application for the debt relief
restrictions order,
(b)
on the acceptance of a debt relief restrictions undertaking
made by the debtor, or
25
(c)
if the court discharges the interim debt relief restrictions
order on the application of the person who applied for it or
of the debtor.
6     (1)
This paragraph applies to a case in which both an interim debt
relief restrictions order and a debt relief restrictions order are
30
made.
      (2)
Paragraph 4(2) has effect in relation to the debt relief restrictions
order as if a reference to the date of that order were a reference to
the date of the interim debt relief restrictions order.
Debt relief restrictions undertaking
35
7     (1)
A debtor may offer a debt relief restrictions undertaking to the
Secretary of State.
      (2)
In determining whether to accept a debt relief restrictions
undertaking the Secretary of State shall have regard to the matters
specified in paragraph 2(2) and (3).
40
8
A reference in an enactment to a person in respect of whom a debt
relief restrictions order has effect (or who is “the subject of” a debt
relief restrictions order) includes a reference to a person in respect
of whom a debt relief restrictions undertaking has effect.

Tribunals, Courts and Enforcement Bill [HL]
Schedule 20 — Debt relief orders: consequential amendments
Part 1 — Amendments to the Insolvency Act 1986
282

9     (1)
A debt relief restrictions undertaking—
(a)
comes into force on being accepted by the Secretary of
State, and
(b)
ceases to have effect at the end of a date specified in the
undertaking.
5
      (2)
The date specified under sub-paragraph (1)(b) must not be—
(a)
before the end of the period of two years beginning with
the date on which the undertaking is accepted, or
(b)
after the end of the period of 15 years beginning with that
date.
10
      (3)
On an application by the debtor the court may—
(a)
annul a debt relief restrictions undertaking;
(b)
provide for a debt relief restrictions undertaking to cease to
have effect before the date specified under sub-paragraph
(1)(b).
15
Effect of revocation of debt relief order
10
Unless the court directs otherwise, the revocation at any time of a
debt relief order does not —
(a)
affect the validity of any debt relief restrictions order,
interim debt relief restrictions order or debt relief
20
restrictions undertaking which is in force in respect of the
debtor;
(b)
prevent the determination of any application for a debt
relief restrictions order, or an interim debt relief
restrictions order, in relation to the debtor that was
25
instituted before that time;
(c)
prevent the acceptance of a debt relief restrictions
undertaking that was offered before that time; or
(d)
prevent the institution of an application for a debt relief
restrictions order or interim debt relief restrictions order in
30
respect of the debtor, or the offer or acceptance of a debt
relief restrictions undertaking by the debtor, after that
time.”
Schedule 20
Section 103(3)

Debt relief orders: consequential amendments
35
Part 1
Amendments to the Insolvency Act 1986
1
The Insolvency Act 1986 (c. 45) is amended as follows.
2     (1)
In section 31 (disqualification of bankrupt) in subsection (1)—
(a)
at the end of paragraph (a) (before “or”) insert—
40
“(aa)
a moratorium period under a debt relief order applies
in relation to him,”;

Tribunals, Courts and Enforcement Bill [HL]
Schedule 20 — Debt relief orders: consequential amendments
Part 1 — Amendments to the Insolvency Act 1986
283

(b)
in paragraph (b) after “order” insert “or a debt relief restrictions
order”.
      (2)
In the heading to that section after “bankrupt” insert “or person in respect
of whom a debt relief order is made”.
3
After section 274 insert—
5
“274A
Debtor who meets conditions for a debt relief order
(1)
This section applies where, on the hearing of a debtor’s petition—
(a)
it appears to the court that a debt relief order would be made
in relation to the debtor if, instead of presenting the petition,
he had made an application under Part 7A; and
10
(b)
the court does not appoint an insolvency practitioner under
section 273.
(2)
If the court thinks it would be in the debtor’s interests to apply for a
debt relief order instead of proceeding on the petition, the court may
refer the debtor to an approved intermediary (within the meaning of
15
Part 7A) for the purposes of making an application for a debt relief
order.
(3)
Where a reference is made under subsection (2) the court shall stay
proceedings on the petition on such terms and conditions as it thinks
fit; but if following the reference a debt relief order is made in
20
relation to the debtor the court shall dismiss the petition.”
4
In section 384(2) (meaning of prescribed amount)—
(a)
at the beginning of the list of provisions insert “section 251S(4);”;
(b)
in the list omit “and” after “section 361(2);” and
(c)
at the end of the list insert “paragraphs 6 to 8 of Schedule 4ZA,”.
25
5     (1)
Section 385(1) (definitions) is amended as follows.
      (2)
In the definition of “the debtor”, before paragraph (a) insert—
“(za)
in relation to a debt relief order or an application for such an
order, has the same meaning as in Part 7A,”.
      (3)
After the definition of “debtor’s petition” insert—
30
““debt relief order” means an order made by the official receiver
under Part 7A;”.
6     (1)
Section 390 (persons not qualified to act as insolvency practitioners) is
amended as follows.
      (2)
In subsection (4) after paragraph (a) insert—
35
“(aa)
a moratorium period under a debt relief order applies in
relation of him,”.
      (3)
In subsection (5) after “order” insert “or a debt relief restrictions order”.
7     (1)
Section 399 (appointment etc of official receivers) is amended as follows.
      (2)
In subsection (1) for “or individual voluntary arrangement” (in both places)
40
substitute “, individual voluntary arrangement, debt relief order or
application for such an order”.

Tribunals, Courts and Enforcement Bill [HL]
Schedule 20 — Debt relief orders: consequential amendments
Part 1 — Amendments to the Insolvency Act 1986
284

      (3)
In subsection (4) for “or individual voluntary arrangement” substitute “,
individual voluntary arrangement, debt relief order or application for such
an order”.
8
In section 412(1) (individual insolvency rules) for “Parts VIII to XI”
substitute “Parts 7A to 11”.
5
9     (1)
Section 415 (fees orders) is amended as follows.
      (2)
In subsection (1) before paragraph (a) insert—
“(za)
the costs of persons acting as approved intermediaries under
Part 7A,”.
      (3)
In that subsection in paragraph (a) for “Parts VIII to XI” substitute “Parts 7A
10
to 11”.
10
In section 415A (fees orders: general), before subsection (1) insert—
“(A1)
The Secretary of State—
(a)
may by order require a person or body to pay a fee in
connection with the grant or maintenance of a designation of
15
that person or body as a competent authority under section
251U, and
(b)
may refuse to grant, or may withdraw, any such designation
where a fee is not paid.”
11
In section 418(1) (monetary limits)—
20
(a)
at the beginning of the list of provisions insert—
“section 251S(4) (maximum amount of credit which a
person in respect of whom a debt relief order is made
may obtain without disclosure of his status);”;
(b)
at the end of the list of provisions insert—
25
“paragraphs 6 to 8 of Schedule 4ZA (maximum amount
of a person’s debts, monthly surplus income and
property for purposes of obtaining a debt relief
order);”.
12    (1)
Section 426A (disqualification from Parliament) is amended as follows.
30
      (2)
In subsection (1) after “bankruptcy restrictions order” insert “or a debt relief
restrictions order”.
      (3)
In subsection (5) after “interim order” insert “, or a debt relief restrictions
order or an interim debt relief restrictions order,”.
      (4)
In subsection (6) after “bankruptcy restrictions undertaking” insert “or a
35
debt relief restrictions undertaking”.
13    (1)
Section 426B (devolution) is amended as follows.
      (2)
In subsection (1) after “Wales,” insert “or makes a debt relief restrictions
order or interim debt relief restrictions order in respect of such a member,”.
      (3)
In subsection (2) after “bankruptcy restrictions undertaking” insert “or a
40
debt relief restrictions undertaking”.
14    (1)
Schedule 9 is amended as follows.
      (2)
In paragraph 1 for “Parts VIII to XI” substitute “Parts 7A to 11”.

Tribunals, Courts and Enforcement Bill [HL]
Schedule 20 — Debt relief orders: consequential amendments
Part 1 — Amendments to the Insolvency Act 1986
285

      (3)
In paragraph 5 for “Parts VIII to XI” substitute “Parts 7A to 11”.
      (4)
In paragraph 6 for “Parts VIII to XI” substitute “Parts 7A to 11”.
      (5)
After paragraph 7 insert—
“Debt relief orders
7A
Provision as to the manner in which the official receiver is to carry
5
out his functions under Part 7A.
7B
Provision as to the manner in which any requirement that may be
imposed by the official receiver on a person under Part 7A is to
take effect.
7C
Provision modifying the application of Part 7A in relation to an
10
individual who has died at a time when a moratorium period
under a debt relief order applies in relation to him.
Debt relief restrictions orders and undertakings
7D
Provision about debt relief restrictions orders, interim orders and
undertakings, including provision about evidence.
15
Register of debt relief orders and debt relief restrictions orders etc
7E
Provision about the register required to be maintained by section
251W and the information to be contained in it, including
provision—
(a)
enabling the amalgamation of the register with another
20
register;
(b)
enabling inspection of the register by the public.”
15    (1)
The Table in Schedule 10 (punishment of offences) is amended as follows.
      (2)
In the entry relating to section 31, in the column describing the general
nature of the offence, after “bankrupt” insert “or person in respect of whom
25
a debt relief order is made”.
      (3)
Insert the following entries after the entry relating to section 235(5)—

“251O(1)
False
1. On
7 years or a fine,

representations or
indictment
or both.

omissions in
2.
12 months or the

30

making an
Summary
statutory

application for a

maximum, or

debt relief order.

both.

251O(2)(a)
Failing to comply
1. On
2 years or a fine,

with duty in
indictment
or both.

35

connection with an
2.
12 months or the

application for a
Summary
statutory

debt relief order.

maximum, or

both.