When a litigant goes bankrupt: a checklist for the other side

When a litigant goes bankrupt mid-claim, the litigation does not simply stop, and it does not simply continue either. Most causes of action vest automatically in the trustee in bankruptcy, the bankrupt may lose standing to pursue their own claim or counterclaim, and the solvent party faces a set of decisions about who it is now litigating against and how fast to act. The High Court’s decision in Cooke, Young & Keidan LLP v Davis [2026] EWHC 2093 (Ch), striking out a bankrupt co-defendant’s £20m counterclaim for want of sufficient interest, is a fresh illustration of how these rules bite. This checklist works through the steps for the other side.

Who is this guide for?

This guide is for litigators acting opposite a party who has been made bankrupt, whether that party is a claimant, a counterclaimant or one of several co-parties, and for insolvency practitioners fielding enquiries from trustees about live litigation. It concerns the bankruptcy of individuals under the Insolvency Act 1986; corporate insolvency engages different machinery and is outside its scope.

What happens to claims on bankruptcy?

On the making of a bankruptcy order, the bankrupt’s estate vests in the trustee under section 306 of the Insolvency Act 1986, and the estate includes most causes of action the bankrupt held at that date. Claims that are purely personal, principally those concerning injury to the bankrupt’s body, mind or reputation, stay with the bankrupt, and hybrid claims with both personal and proprietary elements raise well-known complications. A vested claim can only be pursued by the trustee, or by the bankrupt if the trustee assigns it back, so a bankrupt who continues litigating a vested cause of action in their own name is litigating something they no longer own.

CYK v Davis shows the consequence in practice. The bankrupt co-defendant’s counterclaim fell to be struck out unless it was a partnership asset, which would have given him an interest in a winding-up surplus after creditors were paid. The court found no arguable case to that effect, and it tested the partnership argument against what the parties had themselves pleaded years earlier, when nothing turned on it: those pleadings had consistently asserted that the lender was itself a partner in the venture, which was fatal to the late theory of a two-man partnership. His solvent co-defendant’s counterclaim continued.

The checklist

• Confirm the bankruptcy formally: search the individual insolvency register, obtain the date of the order, and identify the trustee or official receiver.
• Work out whether the cause of action vested under section 306 or remained personal to the bankrupt, and record the analysis, because everything else follows from it.
• Write to the trustee or official receiver early to establish whether the claim is adopted, assigned or abandoned, and keep the correspondence.
• Check for partnership-asset or trust arguments that might preserve the bankrupt’s interest, and test them against the existing pleadings before taking them at face value.
• Decide promptly whether to apply to strike out or for directions, since delay after learning of the bankruptcy weakened the applicant’s position in CYK v Davis.
• Consider joinder of the trustee or official receiver where the vested claim is to continue, and get the correct office-holder named.
• Review any settlement strategy, because a compromise agreed with the wrong party binds no one who matters.
• Reassess costs exposure and recovery realistically on both sides of the claim, including what any judgment against the bankrupt would actually be worth.

What are the common mistakes?

• Assuming the claim dies with the bankruptcy. Vested claims survive in the trustee’s hands, and personal claims never left the bankrupt.
• Ignoring partnership-asset arguments until they surface at a hearing, or advancing them without checking the earlier pleadings that will be quoted back.
• Sitting on knowledge of the bankruptcy. In CYK v Davis the claimant learned of it and then delayed for months, which undercut both its strike-out and its complaint about non-disclosure.
• Continuing to correspond and negotiate with the bankrupt personally about a claim that now belongs to the trustee.

Sources

The primary sources are sections 306 and 436 of the Insolvency Act 1986 on legislation.gov.uk and the judgment in Cooke, Young & Keidan LLP v Davis [2026] EWHC 2093 (Ch). For the abuse-of-process strand of the same judgment, see our companion explainer on warehousing claims, and for bankruptcy petitions founded on foreign judgments see our guide to enforcing a foreign judgment in England after Drelle.

Last updated: 12 August 2026.