4. What are the consequences of bankruptcy?

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 if 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 Trustee/Official Receiver has the right to go to the bankrupt's house for inspection if necessary.

If the bankrupt is the registered owner or one of the registered owners of a real property, the real property or the bankrupt’s share in the real property will become part of the bankruptcy assets and the Trustee/Official Receiver will register the Bankruptcy Order against the real property in the Land Registry.

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).

The Trustee/Official Receiver will distribute the balance of the realized amounts to the creditors by way of dividends after deducting certain expenses.

The balance of earnings of the bankrupt during the effective period of the bankruptcy order (which is usually 4 years for first time bankrupt) after the deduction of the reasonable living expenses of the bankrupt and the bankrupt's family, will also become part of the bankruptcy assets and will be distributed to the creditors after deduction of expenses.

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. Where he exercises his right to travel and leaves Hong Kong without giving the notification, he may suffer the adverse consequence that the period of his bankruptcy order may be extended by the court. 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.

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.