Insolvency Act 1986

328 Priority of debts. E+W

(1) In the distribution of the bankrupt’s estate, his preferential debts (within the meaning given by section 386 in Part XII) shall be paid in priority to other debts.

(2) Preferential debts rank equally between themselves after the expenses of the bankruptcy and shall be paid in full unless the bankrupt’s estate is insufficient for meeting them, in which case they abate in equal proportions between themselves.

(3) Debts which are neither preferential debts nor debts to which the next section applies also rank equally between themselves and, after the preferential debts, shall be paid in full unless the bankrupt’s estate is insufficient for meeting them, in which case they abate in equal proportions between themselves.

(4) Any surplus remaining after the payment of the debts that are preferential or rank equally under subsection (3) shall be applied in paying interest on those debts in respect of the periods during which they have been outstanding since the commencement of the bankruptcy; and interest on preferential debts ranks equally with interest on debts other than preferential debts.

(5) The rate of interest payable under subsection (4) in respect of any debt is whichever is the greater of the following—

(a) the rate specified in section 17 of the M1 Judgments Act 1838 at the commencement of the bankruptcy, and

(b) the rate applicable to that debt apart from the bankruptcy.

(6) This section and the next are without prejudice to any provision of this Act or any other Act under which the payment of any debt or the making of any other payment is, in the event of bankruptcy, to have a particular priority or to be postponed.

Modifications etc. (not altering text)

C1 S. 328 applied (with modifications) by S.I. 1986/1999, art. 3, Sch. 1 Pt. II

C2 S. 328 modified (1.12.1994) by S.I. 1994/2421, art. 11(2)(3), Sch. 7 para. 21

C3 S. 328 excluded (10.8.2005) by The Insurers (Reorganisation and Winding Up) Regulations 2004 (S.I. 2004/353), reg. 20 (as amended (10.8.2005) by S.I. 2005/1998, regs. 2(3), 40(1)-(5))

C4 S. 328(1)-(3)(6) modified (1.12.1994) by S.I. 1994/2421, art. 8, Sch. 4 Pt. II para. 23

C5 S. 328(1)(2) applied (11.12.1999) by S.I. 1999/2979, reg. 14(5)

C6 S. 328(4)(5) applied (with modifications) (1.12.1994) by S.I. 1994/2421, arts. 8(3)(9), 10(6), Sch. 4 Pt. II para. 24

Marginal Citations

M1 1838 c. 110.