Insolvency Act 1986, section 281

Effect of discharge

Part IX Bankruptcy

(1)Subject as follows, where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts, but has no effect—

(a)on the functions (so far as they remain to be carried out) of the trustee of his estate, or

(b)on the operation, for the purposes of the carrying out of those functions, of the provisions of this Part;

and, in particular, discharge does not affect the right of any creditor of the bankrupt to prove in the bankruptcy for any debt from which the bankrupt is released.

(2)Discharge does not affect the right of any secured creditor of the bankrupt to enforce his security for the payment of a debt from which the bankrupt is released.

(3)Discharge does not release the bankrupt from any bankruptcy debt which he incurred in respect of, or forbearance in respect of which was secured by means of, any fraud or fraudulent breach of trust to which he was a party.

(4)Discharge does not release the bankrupt from any liability in respect of a fine imposed for an offence or from any liability under a recognisance except, in the case of a penalty imposed for an offence under an enactment relating to the public revenue or of a recognisance, with the consent of the Treasury.

[F688 (4A)In subsection (4) the reference to a fine [F689 imposed for an offenceF689] includes a reference to [F690 —

(a)a charge ordered to be paid under [F691 section 46 of the Sentencing CodeF691] (criminal courts charge), whether on conviction or otherwise;

(b)F690] a confiscation order under Part 2, 3 or 4 of the Proceeds of Crime Act 2002.F688]

(5)Discharge does not, except to such extent and on such conditions as the court may direct, release the bankrupt from any bankruptcy debt which—

(a)consists in a liability to pay damages for negligence, nuisance or breach of a statutory, contractual or other duty, [F692or to pay damages by virtue of Part I of the Consumer Protection Act 1987, being in either caseF692] damages in respect of personal injuries to any person, or

(b)arises under any order made in family proceedings[F693 or under a [F694 maintenance calculationF694] made under the Child Support Act 1991F693] . . ..

(6)Discharge does not release the bankrupt from such other bankruptcy debts, not being debts provable in his bankruptcy, as are prescribed.

(7)Discharge does not release any person other than the bankrupt from any liability (whether as partner or co-trustee of the bankrupt or otherwise) from which the bankrupt is released by the discharge, or from any liability as surety for the bankrupt or as a person in the nature of such a surety.

(8)In this section—

  • [F695 “family proceedings” means—

(a)[F696 proceedings in the family court;F696] and

(b)family proceedings within the meaning of Part V of the M18 Matrimonial and Family Proceedings Act 1984.F695]

  • “fine” means the same as in the Magistrates’ Courts Act 1980 ; and

  • “personal injuries” includes death and any disease or other impairment of a person’s physical or mental condition.

Definitions used in section 281 3

bankruptcy debt

(a) in relation to a bankrupt, means a person to whom any of the bankruptcy debts is owed (being, in the case of an amount falling within paragraph (c) of the definition in section 382(1) or “bankruptcy debt”, the person in respect of whom that amount is specified in the criminal bankruptcy order in question), and

Defined in s.383(1) · see it in the full Act
party

(3) In section 72B(1) and this paragraph “party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.2A para.1(3) · see it in the full Act

(4) “Party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.ZA1 para.19(4) · see it in the full Act
consent

(3) But where the administrator has made a statement under paragraph 52(1)(b) “consent” means—

(a) consent of each secured creditor of the company, or

(b) if the administrator thinks that a distribution may be made to preferential creditors, consent of—

(i) each secured creditor of the company, and

(ii) the preferential creditors of the company.

Defined in Sch.B1 para.108(3) · see it in the full Act

Cases considering section 281 65

Secretary of State for Work and Pensions v Payne and another

[2011] UKSC 60 · 14 December 2011

Discharge releases a bankrupt from all bankruptcy debts. A benefit repayment liability is therefore extinguished rather than remaining recoverable through deductions (see paras [17]–[18]; [40]–[43]).

David Bacci & Ors v Matthew Green

[2022] EWCA Civ 1393 · 25 October 2022

Discharge from bankruptcy does not release a debt incurred through fraud or fraudulent breach of trust. That express policy strongly favoured allowing enforcement against pension rights after discharge (see paras [3]; [32]-[35]).

Azuonye v Kent

[2019] EWCA Civ 1289 · 19 July 2019Limits

Section 281(1) releases the bankrupt from bankruptcy debts on discharge but preserves creditors’ rights of proof. The court relies on this distinction when interpreting the word payable. (see paras [14], [25]) Section 281(5) is considered as part of the statutory treatment of bankruptcy debts arising under family proceedings, which are not necessarily released on discharge. (see paras [36]-[38]) Section 281(5)(b) is identified as covering bankruptcy debts arising under orders made in family proceedings. The court treats that special statutory treatment as confined to family proceedings and not applicable to income payments orders. (see paras [36]-[38])

45 more judgments, and what each says about section 281, are in the case-law panel in the full Act.

Amendments and notes

13 notes from legislation.gov.uk

Amendments

  1. F688S. 281(4A) inserted (24.3.2003) by 2002 c. 29, ss. 456, 458(1)(3), Sch. 11 para. 16(2); S.I. 2003/333, art. 2, Sch. (subject to arts. 3-13 (as amended by S.I. 2003/531, arts. 3, 4)); S.S.I. 2003/210, art. 2, Sch. (subject to arts. 3-7)
  2. F689Words in s. 281(4A) inserted (13.4.2015) by Criminal Justice and Courts Act 2015 (c. 2), s. 95(1), Sch. 12 para. 6(a); S.I. 2015/778, art. 3, Sch. 1 para. 78
  3. F690Words in s. 281(4A) inserted (13.4.2015) by Criminal Justice and Courts Act 2015 (c. 2), s. 95(1), Sch. 12 para. 6(b); S.I. 2015/778, art. 3, Sch. 1 para. 78
  4. F691Words in s. 281(4A) substituted (1.12.2020) by Sentencing Act 2020 (c. 17), s. 416(1), Sch. 24 para. 88 (with Sch. 27); S.I. 2020/1236, reg. 2
  5. F692Words substituted by Consumer Protection Act 1987 (c. 43, SIF 109:1), ss. 41(2), 47(1)(2), 48, Sch. 4 para. 12
  6. F693Words in s. 281(5)(b) inserted (5.4.1993) by Child Support Act 1991 (c. 48), s. 58(13), Sch. 5 para. 7; S.I. 1992/2644, art. 2
  7. F694Words in s. 281(5)(b) substituted (3.3.2003 for specified purposes, otherwise prosp.) by 2000 c. 19, ss. 26, 86(1)(2), Sch. 3 para. 6 (with s. 83(6)); S.I. 2003/192, art. 3, Sch. text substituted prospectively or the amendment may be in effect for limited purposes, see the commentary.
  8. F695Definition of "family proceedings" substituted (14.10.1991) for the definitions of "domestic proceedings" and "family proceedings" by Children Act 1989 (c. 41, SIF 20), ss. 92, 108(6), Sch. 11 Pt. II para. 11(2), Sch. 14 para. 1(1); S.I. 1991/828, art. 3(2)
  9. F696Words in s. 281(8) substituted (22.4.2014) by Crime and Courts Act 2013 (c. 22), s. 61(3), Sch. 10 para. 74; S.I. 2014/954, art. 2(d) (with art. 3) (with transitional provisions and savings in S.I. 2014/956, arts. 3-11)

Modifications

  1. C966S. 281(4) extended by Drug Trafficking Offences Act 1986 (c. 32, SIF 39:1), s. 39(5)
  2. C967S. 281(4) amended by Criminal Justice (Scotland) Act 1987 (c. 41, SIF 39:1), SS. 123, 170, Sch. 8 para. 6, Sch. 15 para. 110
  3. C968S. 281(4) amended by Criminal Justice (Scotland) Act 1987 (c. 41, SIF 39:1), SS. 45(4), 47(4)(a).

Marginal citations

  1. M181984 c.42 (49:3).