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Bankruptcy Main Effects Pros & Cons Petition Statutory Demand Bankruptcy Order Next

Petition Both debtors and creditors can petition for the debtor to be made bankrupt. The Debtor’s Petition When a debtor decides to go bankrupt he must petition the county court for the insolvency district where he/she lives (High Court in London). The debtor must pay the court fee and deposit towards the administration of the Order, currently £140 and £310 respectively. The court has some limited powers allowing it to waive the fee, but not the deposit. Completing the debtor’s petition - Form 6.27 The petition is primarily designed with people who have been in business in mind. As these are the majority of people declaring bankruptcy. The petition must be presented at the debtor’s local court with bankruptcy jurisdiction unless the petitioner has lived and/or traded in the area of another county court for most of the previous six months. It should be noted that not all county courts have bankruptcy jurisdiction. Completing the Statement of Affairs - Form 6.28 An extensive amount of information is required on this form, much of which may not be readily to hand. Guidance notes are supplied with the form. However, they are not comprehensive, so the following should be noted. Page A Mortgage details. Secured loans information. Value of any property. Page B All creditors should be listed in alphabetical order. All unsecured debts - including joint debts - must be included. Do not include any shortfall due to secured creditors, since this is covered by Page A. Page C1 Great care needs to be taken when completing this page. Any money in bank, building society or post office accounts which is needed to live on should be withdrawn from the relevant accounts before the petition is taken to court. This money should not be included in this section. Do not include the value of any equity in property listed on Page A Pages C2 and C3 When setting the value of any vehicle, ensure it is not set too high. If the vehicle is subject to HP or conditional sale, the owner is the creditor. When calculating the value of furniture and belongings, use as a guide what the items would sell for at auction. Do not use the price for the items new or the cost to replace them. Any valuables listed here risk being taken. Cash in hand should be entered in C3(e). Page D List here any creditor who has a prior claim to goods because of any distress action already taken. The creditor will only be allowed to keep the benefit of the distress if it has been completed prior to the bankruptcy order. Page E This is where you enter any ongoing court action taken by creditors. Once the petition is filed at court, such actions are stayed with no further steps being taken. Page F The court uses this information to decide whether an insolvency practitioner should investigate whether an IVA is more appropriate. Only general attempts to make arrangements with creditors should be entered here. Not attempts to make separate arrangements with individual creditors. Page G Using the information contained in the financial statement, an offer can be made if there is income available. It is not necessary to make an offer if there is no income available. The Official Receiver does not expect an offer if the debtor is on a low income or benefits. Only regular income should be included, as well as any contributions from other members of the debtor’s household. Debtors are not expected to limit their expenditure to income support levels. Official Receivers tend to be more generous in the items of essential expenditure that they will allow. Offers of less than £200 per month can cost more than that amount to administer and so such offers are of little benefit to creditors. Once completed, the debtor needs to take the forms (along with the fee and deposit) to be sworn. On receipt the court will arrange for the matter to be put before a district judge. Many cases do not result in a hearing. However, should a hearing be arranged, the debtor will be expected to attend. At the hearing the court will refer the case to an insolvency practitioner for consideration of an IVA if: the debts are below £20,000 assets are at least £2,000 the debtor has not been subject to bankruptcy proceedings in the last five years; and it seems appropriate for an insolvency practitioner to be appointed. If the debtor does not want an IVA, then the court should be immediately informed. If an IVA isn’t applicable, the court will either: Make a bankruptcy order; Dismiss the petition - if the debtor’s assets appear to exceed liabilities; Adjourn the petition - if the debts are not legally enforceable; Stay the petition - if an alternative method of dealing with the debts would be more appropriate. If a bankruptcy order is made, the procedure that follows is similar to bankruptcy under a creditors’ petition. Creditors’ Petition If an individual creditor is owed more than £750, they can petition for the debtor to be made bankrupt. Alternatively, creditors can join together to meet the £750 requirement. Proceedings normally take place at the debtor’s local county court with bankruptcy jurisdiction. However, Crown departments (i.e. Inland Revenue, Customs & Excise) can use the High Court in London. Creditors can only ask for someone to be made bankrupt if: the debt is unsecured; and for a fixed sum which the debtor ‘appears unable to pay’. The debt can be payable immediately or at some time in the future. This can be established only by them having a Statutory Demand served or by being unable to enforce a judgement debt by means of an execution against goods by a bailiff. For example, if a Warrant of Execution was returned unsatisfied, because the debtor did not have sufficient goods which could be seized in payment of the debt, this could be seen as evidence that the debtor ‘appears unable to pay’ his debts. And so the creditor could proceed to petition for the debtor’s bankruptcy. The bailiff, however, must have made serious efforts to levy execution. The bailiff simply visiting the debtor’s property and reporting that he failed to gain access is not sufficient. You can view and download the various bankruptcy related forms, including the Debtor's Petition 6.27, at the Insolvency Service website, where they are avaialble in Word and PDF formats. >> Statutory Demands

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