Overview Of Exceptional Circumstances On Possession Of A Bankrupt’s Home
Exceptional circumstances on possession of a Bankrupt’s home can arise when the Trustee in Bankruptcy seeks to apply to Court for such an order for repossession of a Bankrupt’s home.
Section 336 of the Insolvency Act 1986 (‘the Act’) governs any application to dispose of a Bankrupt’s property in the typical situation in which there is a non-Bankrupt husband or wife present.
Section 336(4) of the Insolvency Act 1986 says the Court is required to balance the interests of creditors against the needs of any spouse, the needs of any children, and all the circumstances of the case other than the needs of the Bankrupt.
However, per Section 336(5) of the Insolvency Act 1986 says after one-year of Bankruptcy the interests of the creditors outweigh all other interests unless the circumstances of the case are exceptional:
Where such an application is made after the end of the period of one year beginning with the first vesting under Chapter IV of this Part of the bankrupt’s estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt’s creditors outweigh all other considerations.
Exceptional Circumstances Involved In A Repossession Order Of The Home
Six principles are helpful to consider what is treated as exceptional circumstances.
Need For Exceptional Circumstances
The presence of exceptional circumstances is a necessary condition to override the assumption that the interests of the creditors outweigh all other considerations, but the presence of exceptional circumstances does not stop the court from making an order for sale.
Medical Exceptional Circumstances
Usually, exceptional circumstances relate to the personal circumstances of one of the joint owners, such as a medical or mental condition.
All Circumstances Taken Into Account
The categories of exceptional circumstances are not to be categorised or defined and the court makes a judgment after looking at all the circumstances.
Exceptional Is Special Not Simply Sad
The circumstances must be exceptional and this means they must be exceptional or special circumstances that are outside the usual sad consequences of debt. There must be good reasons not found in the ordinary run of cases.
Eviction To Another Less Substantial Property Is Not Exceptional
It is not uncommon for a wife with children to be faced with eviction in circumstances where the realisation of her beneficial interest will not produce enough to buy a comparable home in the same neighbourhood or, indeed, elsewhere. Such circumstances are not treated as exceptional.
No Return To Creditors Is Not Treated As Exceptional
For the purposes of weighing the interests of the creditors, the creditors have an interest in the order for sale being made, even if the whole of the net proceeds will go towards the expenses of the bankruptcy. The fact that they will be swallowed up in paying those expense is not an exceptional circumstance justifying the removal of the presumption that the interests of the creditors outweigh all other considerations.
These exceptional circumstances have been derived from Dean v Stout [2005] BPIR 1113 as to the meaning of and the Court’s approach to the meaning of exceptional circumstances.
