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This guidance describes the general functions of Accountant in Bankruptcy, interim trustees, trustees and commissioners in relation to their responsibilities regarding bankruptcies which started on or after 30 November 2016.
When there is a Deduction of Earnings Order (DEO) in effect prior to an award of bankruptcy that order ceases to have effect upon such an award. Unlike other forms of arrestment any deductions made after the date of bankruptcy are not repayable to the estate, under section 24(9) of the Act.
Once bankruptcy has been awarded, the Child Maintenance Service (CMS) cannot enforce a pre-bankruptcy DEO nor take any other steps to recover pre-bankruptcy arrears. The CMS may claim in the bankruptcy but upon discharge the debtor will be discharged of personal liability for such arrears under section 145(4)(b) of the Act.
The debtor is liable to continue to make payments of the DEO after the award of bankruptcy. There is nothing to prevent the CMA from obtaining a DEO in respect of debtors’ post-bankruptcy earnings and any such obligation must be taken into account by The Accountant in considering an application by a trustee for a Debtor Contribution Order (see section 8).
Trustees should bear this in mind when considering a contribution and also be aware that the CMS central office may be prepared to discuss the question of modifying the terms of an existing DEO.