Bankruptcy

Question 1

Describe the role of the trustee in bankruptcy (3)

Answer 1

• Sell as much of the bankrupts property as is needed to pay the creditors
• They will repay in a strict order of priority

Question 2

State 4 types of debt that remain payable even after the bankrupt has received their discharge from bankruptcy (4)

Answer 2

• Money payable under maintenance /matrimonial orders
• Fines/debts incurred by fraud
• Outstanding student loans
• Damages for personal injury caused by negligence

Question 3

State 4 restrictions that a bankruptcy order imposes on an individual who has not been discharged (4)

Answer 3

• Cannot obtain credit of more than £500 frpm a single lender without disclosing their bankruptcy
• Must make payments in advance for the supply of goods or services
• Unable to trade in any name except that in which they were declared bankrupt by the court
• Are banned from acting as a director of a company/ create/manage/promote a company
• Cannot work as an insolvency practitioner

Question 4

Describe the rules that apply to a bankrupts assets whilst they are still under the bankruptcy order (6)

Answer 4

• Cannot deal with their property because it legally belongs to the TIB
• Must disclose all their property to the TIB
• Must not conceal any debts or assets from the TIB
• Must not destroy or falsify any records of their affairs
• Must not make any false statements to the TIB
• Must not dispose of property with the intent to defraud creditors
• Must not fraudulently give preference to one creditor over another
• Must not leave the country and take any of their property with them

Question 5

Outline the process of setting up an IVA (5)

Answer 5

• Apply to court to be helped by an insolvency practitioner (IP)
• individual and IP make a formal repayment proposal to the creditors to pay part/all debt, included payments and time period
• IP checks with creditors to see if proposal is acceptable
• creditors vote on whether the scheme is acceptable and if the creditors holding more than 75% total debt are happy, the proposal is accepted
• if the proposal is agreed, a supervisor is appointed to oversee repayments

Question 6

Describe the advantages of setting up an IVA instead of being made bankrupt (4)

Answer 6

• Usually costs less
• Individual retains control over their assets
• Less stigma
• Individual remains closely involved in the process
• Not subject to bankruptcy restrictions I.e. not being able to obtain credit of more than £500 from a single lender or acting as director of a company