Bankruptcy, Individual Voluntary Arrangement and Winding-up of Companies
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4. What are the consequences of bankruptcy?

When the Court has granted a bankruptcy order against a debtor, no other legal proceedings can be taken or continued with against the debtor or the debtor’s assets without the permission of the Court. The bankruptcy order will be advertised by the Official Receiver in the Gazette and two newspapers (one in Chinese and one in English).

The Trustee (the Official Receiver an act in this capacity) will take control of the assets of the bankrupt. The bankrupt's assets will be realised by the Trustee for repaying the debts. The bankrupt may also be required to give part of the existing income to the Trustee for repayment. The Trustee/Official Receiver has the right to go to the bankrupt's house for inspection if necessary.

The bankrupt's provident fund will usually be considered as part of the bankrupt's assets (subject to the provisions of the relevant provident fund scheme). If retired civil servants become bankrupt, then their pensions cease to be payable unless there are discretionary arrangements. Also as mentioned in a High Court judgment ( Re Choi Lai Ming ex parte The Official Receiver), the Government has security rights over civil servants' salaries and pensions under the Home Purchase Scheme loan (a loan advanced to a civil servant under the Government's Home Financing Scheme).

After realising the bankrupt's assets and deducting the administrative expenses, the Trustee/Official Receiver will distribute the balance to the creditors by way of dividends. After the deduction of the amount of reasonable living expenses of the bankrupt and the bankrupt's family, the balance of earnings during the effective period of the bankruptcy order will be distributed to the creditors.

Can the bankrupt travel outside Hong Kong without any restriction?

Where a bankrupt leaves Hong Kong , the law does not impose on him an express duty to notify the Trustee of his itinerary and where he can be contacted. The bankrupt may freely leave without giving notification. What the law does is to impose a sanction for non-notification, namely, the relevant period for automatic discharge of bankruptcy shall cease to run during the period of his absence and until he notifies the Trustee of his return. Where he exercises his right to travel and leaves Hong Kong without giving the notification, he suffers the adverse consequence provided for by statute (e.g. if the bankrupt leaves Hong Kong for two months without giving notification, the date of automatic discharge of his bankruptcy may be suspended for two months accordingly).

Where the bankrupt travels outside Hong Kong frequently on short trips for business, leisure or any other reason, he may, if he is in a position to do so, give an overall notification in advance covering all his intended trips over a forthcoming period. He needs not separately give a notification for each trip.

The restriction on the right to travel is contained in section 30A(10)(b)(i) of the Bankruptcy Ordinance which provides for both notification and the sanction in the event of non-notification. The purpose of the restriction is to ensure that bankrupts stay within the radar of the Trustee so that the Trustee could if required obtain his co-operation in the administration of his estate.

In computing time, the law usually ignores fractions of a day (see the relevant judgment delivered by the Court of Final Appeal). So, absences of less than a day should be disregarded. The relevant period for automatic discharge of bankruptcy is suspended not only until the bankrupt's return to Hong Kong but also for such further period until he notifies the Trustee of his return. Where the bankrupt does not notify the Trustee of his return, the relevant period continues to be suspended indefinitely until he does.

Effect on the bankrupt's family members (e.g. joint owners of a flat or holders of a joint account)

Family members will NOT be required to bear the bankrupt's indebtedness. If the bankrupt owns a flat under the joint name of his/her spouse, then the bankrupt's share of the house may be realised. If the bankrupt holds a joint account with his family members, then the bankrupt's portion of the total amount may be drawn to pay off the debt.