Bankruptcy - The Process

Bankruptcy is usually the last resort for debtors and is commenced when a petition is served on the debtor.

The bankruptcy can be petitioned via 2 methods. Firstly you can petition for your own bankruptcy or your creditors may take into their hands and present a petition to the court if you owe more than £750.00.

Debtor's Petition

You can petition for your own bankruptcy by alleging that you are unable to pay your debts to your creditors. We will refer you to one of our leading Insolvency Practitioners who will compile a statement of affairs which will need to be submitted to the court. This will include details of all your creditors, debts, liabilities and assets.

Debtors often decide to petition for their own bankruptcy to escape from the pressures being imposed on them by their creditors for payment. By taking this approach, the financial affairs of the company will be dealt with by the appointed trustee in bankruptcy

This will be an enormous relief for you, as you will no longer have the worry of having to deal with all your creditors each day, nor will the creditors be chasing you!

Creditor's Petition

If one of your creditors presents a petition to the court, there must be an unsecured debt of at least £750.00 being owed to that creditor. The creditor will need to show the court that you are unable to pay the debt or at least that there is little prospect of you repaying the debt once you have either failed to comply with a statutory demand (a legal demand for payment of the debt which is formally served on the debtor by the creditor) or where you have failed to satisfy the execution of a judgement debt.

If the creditor is owed less than £750.00, he cannot present a petition to the court on his own but h n however join together with your other creditors provided that the total amount is above £750.00.

The petition is presented to the High Court or a county court that has bankruptcy jurisdiction.

The Order

If your creditors have made the petition it is most likely that the bankruptcy order will be granted provided that the creditors meet the criteria.

If you are petitioning for your own bankruptcy, we will appoint our Insolvency Practitioner to investigate whether a voluntary arrangement can be undertaken instead before we work with you to decide whether this is the best option for you.

The bankruptcy order will generally be discharged after a period of one year. This period may also be reduced if the Official Receiver files a notice requiring further investigations into the conduct and affairs of the bankrupt, or where the investigation has been concluded.

The Trustee in Bankruptcy

Once the court has made the bankruptcy order, the Official Receiver will take full control of your property. You will be required to submit a statement of affairs to the Official Receiver within 21 days which we will assist you with. The official Receiver will then determine whether it is necessary to call a meeting of your creditors to allow them to appoint their own Insolvency Practitioner.

If the creditors do not appoint their own Insolvency Practitioner and your recommended Official Receiver decides that the creditors meeting is not necessary, then the Official Receiver will continue to carry to the bankruptcy as the trustee in bankruptcy.

The Bankrupt's Property

Most of your real and personal estate will automatically vest in the trustee in bankruptcy. There are some assets that you are legally entitled to retain such as your tools used for trading, clothing and furniture if it is not of high value.

You will also have the right to retain any salary you make subject to your trustee' s right to make an application for an income payments order if your salary exceeds the sufficient amount you would need to provide for you and your family. The income payment order can be set up for a period of three years.

If you own your home jointly with your spouse or even if your property is in your sole name, your spouse will have a legal or equitable interest and the trustee will not be able to realise such a major asset immediately.

If however there is no spouse or minors living with you, the trustee can sell the property immediately.

Distribution of Assets

The trustee in bankruptcy has the role of converting your property and assets into money which is then used to repay your creditors.

Your secured creditors may not be dependent on the trustee for repayment of their debt as they are able to realise the assets that they have security over. If however, the sale of the secured assets does not produce sufficient funds, the secured creditors will need to claim the remainder as an unsecured creditor.

Discharge

The bankruptcy will come to an end once the bankruptcy order has been discharged. T means that you will be released from most of your debts.

The bankruptcy order is automatically discharged after a period of one year. By this point, it may be that the realisation and diction of your assets are not complete and therefore the trustee in bankruptcy will continue with the task.

Any property that you acquire once the bankruptcy is discharged belongs to you, and will not vest in the trustee in bankruptcy.