Bankruptcy
Does not cover corporate insolvency in the UK does in America
Insolvency Act 1986
Insolvency Rules 2016/1024
Enterprise Act 2002.
Bankruptcy Petition
Application to the court for a bankruptcy order
o made by:
creditor(s)
debtor online application outside of courts jurisdiction
Supervisor of a voluntary scheme
director of public prosecutions etc.
Creditor's Petition
o minimum debt = £5000 (unsecured)
o alleges that debtor is unable to pay debts or has no real prospect of paying
o Proved by either:
non-compliance with statutory demand form is filled in with details
of who owes money, how much and how overdue serve it on the
person fail to comply within 21 days is a ground for proving they
can't pay
failure to satisfy judgment debt county court judgments
Debtor's Petition (IA s.272)
o debtor can apply online since April 2016
o online application form includes a statement of affairs detailing assets,
liabilities and creditors, and pay £130 for adjudication of their application and
a £525 bankruptcy deposit cost of managing the bankruptcy
o previously had to apply to court
Supervisor of/person bound by a voluntary arrangement
o supervisor may bring a petition on the following grounds:
the debtor has failed to comply with their obligations under the
voluntary scheme
the debtor provided false/misleading info in connection with entry
into the scheme
individual voluntary arrangement with creditor debtor can't pay all
of the money owed back but can pay some
If an order is made:
o If the petition came from the debtor, an interim order may be granted so a
voluntary composition of creditors can be arranged
o Official Receiver (OR) appointed receiver and manager of the bankrupt’s
estate will become trustee in bankruptcy unless the court appoints
another person
o the bankrupt must:
Submit a statement of affairs
provide all information, records and papers
attend official receiver; AND
, deliver property to OR
o Note bankrupt's current liabilities, assets etc as they will vest in OR
o under Small Business, Enterprise and Employment Act 2015 OR will
automatically become the trustee of the bankrupts estate unless the court
appoints another person as of October 2016
Subsequent Procedure
OR receives statement of affairs and investigates the bankrupt’s conduct and affairs
within 21 days
OR reports to court and sends report and summary of statement of affairs to
creditors.
OR calls first meeting of creditors discuss best way forward
First meeting of creditors
Primarily to decide on trustee in bankruptcy can carry on with OR or elect their
own typically depends on the size of the estate and how much they want
to/expect to get out
Trustee in bankruptcy must be an insolvency practitioner
If there is no meeting/no trustee appointed, the OR is trustee.
At all creditor meetings the Insolvency Rules 2016 cover advertising, conduct etc
o creditors vote in proportion to their unsecured debt larger debt = more
voting powers as they have more to lose
Bankruptcy Restrictions restrictions on bankrupt party
Must disclose bankrupt status of taking credit over £500
May not set up a business under a different name without disclosing the bankrupt
status
May not be a company director or involved in the promotion/management of a
company or practice as a solicitor/barrister
Restricted from holding certain public offices.
Trustee in Bankruptcy
Collect in assets, realise and distribute:
o 1 - Secured creditors e.g. bank may have security over your house.
o 2 - Costs of bankruptcy
o 3 - Trustees remuneration
o 4 - Preferential debts e.g. employees
o 5 - Ordinary unsecured creditors
o 6 - Deferred creditors
o 7 - Balance to the bankrupt
Each class must be paid in full before the next class receives anything
o once all is paid to the top 4 classes there is usually little left whatever is
left will be distributed in proportion to what is owed.
Secured Creditors
Does not cover corporate insolvency in the UK does in America
Insolvency Act 1986
Insolvency Rules 2016/1024
Enterprise Act 2002.
Bankruptcy Petition
Application to the court for a bankruptcy order
o made by:
creditor(s)
debtor online application outside of courts jurisdiction
Supervisor of a voluntary scheme
director of public prosecutions etc.
Creditor's Petition
o minimum debt = £5000 (unsecured)
o alleges that debtor is unable to pay debts or has no real prospect of paying
o Proved by either:
non-compliance with statutory demand form is filled in with details
of who owes money, how much and how overdue serve it on the
person fail to comply within 21 days is a ground for proving they
can't pay
failure to satisfy judgment debt county court judgments
Debtor's Petition (IA s.272)
o debtor can apply online since April 2016
o online application form includes a statement of affairs detailing assets,
liabilities and creditors, and pay £130 for adjudication of their application and
a £525 bankruptcy deposit cost of managing the bankruptcy
o previously had to apply to court
Supervisor of/person bound by a voluntary arrangement
o supervisor may bring a petition on the following grounds:
the debtor has failed to comply with their obligations under the
voluntary scheme
the debtor provided false/misleading info in connection with entry
into the scheme
individual voluntary arrangement with creditor debtor can't pay all
of the money owed back but can pay some
If an order is made:
o If the petition came from the debtor, an interim order may be granted so a
voluntary composition of creditors can be arranged
o Official Receiver (OR) appointed receiver and manager of the bankrupt’s
estate will become trustee in bankruptcy unless the court appoints
another person
o the bankrupt must:
Submit a statement of affairs
provide all information, records and papers
attend official receiver; AND
, deliver property to OR
o Note bankrupt's current liabilities, assets etc as they will vest in OR
o under Small Business, Enterprise and Employment Act 2015 OR will
automatically become the trustee of the bankrupts estate unless the court
appoints another person as of October 2016
Subsequent Procedure
OR receives statement of affairs and investigates the bankrupt’s conduct and affairs
within 21 days
OR reports to court and sends report and summary of statement of affairs to
creditors.
OR calls first meeting of creditors discuss best way forward
First meeting of creditors
Primarily to decide on trustee in bankruptcy can carry on with OR or elect their
own typically depends on the size of the estate and how much they want
to/expect to get out
Trustee in bankruptcy must be an insolvency practitioner
If there is no meeting/no trustee appointed, the OR is trustee.
At all creditor meetings the Insolvency Rules 2016 cover advertising, conduct etc
o creditors vote in proportion to their unsecured debt larger debt = more
voting powers as they have more to lose
Bankruptcy Restrictions restrictions on bankrupt party
Must disclose bankrupt status of taking credit over £500
May not set up a business under a different name without disclosing the bankrupt
status
May not be a company director or involved in the promotion/management of a
company or practice as a solicitor/barrister
Restricted from holding certain public offices.
Trustee in Bankruptcy
Collect in assets, realise and distribute:
o 1 - Secured creditors e.g. bank may have security over your house.
o 2 - Costs of bankruptcy
o 3 - Trustees remuneration
o 4 - Preferential debts e.g. employees
o 5 - Ordinary unsecured creditors
o 6 - Deferred creditors
o 7 - Balance to the bankrupt
Each class must be paid in full before the next class receives anything
o once all is paid to the top 4 classes there is usually little left whatever is
left will be distributed in proportion to what is owed.
Secured Creditors
