12 - BL - Insolvency Individ Flashcards
What are the two personal insolvency procedures?
(1) Individual Voluntary Arrangements (‘IVAs’);
(2) bankruptcy
What is the process of obtaining an IVA?
The debtor drafts proposals setting out a statement of their affairs (eg full details of assets and liabilities).
The nominee (insolvency practitioner) submits a report to the court.
What percentage of Creditors need to approve an IVA?
Creditors holding at least 75% (by value) of the debt must vote to approve the terms of the IVA.
Must include at least 50% unconnected parties
How can a debtor get a moratorium for an IVA?
- Apply to the court for an interim order.
- If the court grants the order, it brings about a moratorium,
What does the moratorium for an IVA do?
Freezing existing or proposed bankruptcy and other proceedings and legal process (including execution, landlord’s right of peaceable re-entry and/or distress for rent) against the debtor, without leave (in any such case) of the court.
How long does a moratorium for an IVA last?
14 days which the court can extend.
Who is bound by an IVA?
The debtor and all of their unsecured creditors
Does not bind preferential & secured creditors unless they consent to the IVA
What happens if the debtor doesn’t keep up with the IVA?
The supervisor can usually petition for their bankruptcy.
How does a bankruptcy begin
a creditor presents a bankruptcy petition.
Who can a Bankruptcy petition be brought against?
An individual
- present or
- domiciled
in the UK
Bankruptcy - how is the debtor’s inability to pay evidenced?
- a statutory demand for £5,000 that has neither been satisfied within 21 days from service of that demand, nor set aside by the court; or
- a judgment debt that has been returned unsatisfied
Court has discretion to make a bankruptcy order.
Bankruptcy - What restrictions are placed on the debtor?
- deprived of ownership of their property except for their reasonable domestic needs. 🏡
- obtaining credit of over £500 without disclosing the bankruptcy, 💷
- acting as a director or being involved in the management of a company, 🎩
- practising in certain professions. 👨💼
- giving gifts 🎁
Who manages the Bankrupts’ assets?
The bankrupt’s estate vests in the Trustee in Bankruptcy immediately upon appointment of trustee or Official Receiver
What is the order of creditors in a personal bankruptcy?
- secured creditors (but limited to the value of the security itself and ranking with ordinary unsecured creditors for any excess amount owing); 🏡⛓️
- expenses of the bankruptcy; 🤓
- specially preferred creditors (training/apprenticeship fees);👨🏫
- preferential creditors (similar to those on corporate winding up); 🧑🍳🇬🇧
- ordinary unsecured creditors; 😒
- statutory interest; 🏦
- debts of a spouse (must be provable but they are postponed to other creditors); and finally, 👰
- any surplus is payable to the bankrupt. 🥳
What are the duties of a Bankrupt in respect of the Trustee or Official Receiver?
(a) give information;
(b) attend on the trustee
(c) do all such other things, as the trustee may for the purposes of carrying out his functions reasonably require.”
