Introducing bankruptcy procedures
Generally speaking, a bankruptcy case will undergo the following stages:
Issuing a statutory demand for debt repayment to the debtor (if applicable)
Presenting a bankruptcy petition to the Court, to the Official Receiver's Office and to the debtor
Granting of bankruptcy order by the Court
The debtor's assets are collected and realised by the Trustee/Official Receiver
Distributing the relevant proceeds and part of the debtor's income to the creditors
Discharge of bankruptcy order
What are the consequences of bankruptcy?
Upon bankruptcy, 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 . 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, 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.
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).
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.
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.
What should a bankrupt do or avoid doing after the granting of a bankruptcy order?
Bankrupts should not make repayments directly to individual creditors without the approval of the Court and the Official Receiver. They should stop using credit cards or applying for loans from financial institutions. They should also stop paying life insurance premiums.
Bankrupts will not be able to act as company directors or to practise in certain professions such as lawyer, estate agent or insurance agent, etc. They cannot purchase luxuries such as buying cars or travelling by taxi unless they have reasonable grounds to do so.
Bankrupts may commit a bankruptcy offence and be liable to imprisonment if they try to quit Hong Kong and take with them personal assets that should be distributed among their creditors. Bankrupts may also be liable to imprisonment if they try to conceal or avoid receiving legal documents in the bankruptcy proceedings or cause any unnecessary delay in the proceedings.
If the bankrupts are also civil servants, then the Official Receiver will inform the departmental secretary of the relevant government department, the Civil Services Bureau and the Treasury. If the bankrupts work in banks, then their employer must be informed. If the bankrupts work in another part of the private sector, however, then the Official Receiver/Trustee will not approach their employers unless it is necessary for the collection or investigation of the bankrupts' financial information.