Bankruptcy

Question 1

What procedure to apply for a company’s bankruptcy?

Answer 1

Present bankruptcy petition to court
Proving they are owed more than £5000 unsecured debt
Proving debtor is unable to pay them
By demonstrating they have not complied within 3 weeks of a statutory demand requiring payment
Or bailiffs being unable to collect the debt

Question 2

What is status of bankrupt’s life assurance policy or bond not under trust

Answer 2

Policy becomes property of Official Receiver / Trustee in Bankruptcy

OR/TIB can stop premiums

OR/TIB can surrender policy

OR/TIB can use proceeds to pay creditors

Question 3

What is status of bankrupt’s SIPP

Answer 3

Can apply to court regarding excessive contributions in recent years
Court can order pension to be restored if excessive contributions have been made.
Excess can be paid to OR/TIB
Because the DC scheme is not already in payment it cannot be subject of a court order

Question 4

What is a bankrupt is due to inherit

Answer 4

Bankrupt must not hide their assets from OR/TIB
They have to declare inheritance
The OR/TIB can claim any asset the debtor receives during bankruptcy

Question 5

Once made bankrupt what possessions will they be allowed to keep

Answer 5

Tools, books, vehicles needed for self-employment
Household essentials to meet basic needs
Any property held on trust for another

Question 6

If Bankrupt lives alone what is the affect on their property

Answer 6

It go to the OR/TIB
Who can obtain an order for sale of the property
They have 3 years to do so

Question 7

What is the process for establishing an Individual Voluntary Arrangement (IVA)

Answer 7

• Debtor makes formal proposal to creditors that he will repay part or all of the debt
• Debtor must apply to the court
• Must be helped by an insolvency practitioner
• Creditors meeting is held and if 75% of creditors by value agree, proposals are accepted
• All creditors are then legally bound by the IVA
• The insolvency practitioner oversees repayments / supervises debtor
• may make application for the grant of an interim order
• that prevents creditors from proceeding with a bankruptcy petition
• an IVA usually lasts 5 years

Question 8

Advantages of using an IVA v being made bankrupt

Answer 8

Debtor is closely involved in the process
It costs less than bankruptcy
The restrictions of bankruptcy are avoided
He will be able to act as a Director
Debtor avoids the stigma of being made bankrupt