Bankruptcy Flashcards
Bankruptcy - process to commence
- Creditors must be owed jointly £5k unsecured debt
- Must prove debtor’s inability to pay - not complied within 3 weeks of statutory demand and bailiffs unable to collect
- Debtor can petition themselves - must be unable to pay
- Petition now made online
- Adjudicator decides whether to make bankruptcy order or not
Bankruptcy process once order granted
- OR takes control of debtor’s assets
- Debtor submits statement of affairs
- OR decides whether to call creditor’s meeting to appoint insolvency practitioner as TIB
- Must call meeting if 10% of creditors (by value) demand it
- If no meeting, OR acts as TIB
- TIB collects bankrupt’s property, sells and uses proceeds to repay debts
What property can the debtor keep? (3)
- Tools/books/vehicles needed for work
- Household essentials
- Property held on trust
What happens to property once bankrupt discharged
- Needs to be assigned back to debtor
Bankrupt’s Income - Options for TIB (3)
- Can ask debtor to sign:
- Income payment agreement
- Income payment order
- Both require debtor to make contributions to pay off debts if affordable
TIB options for main residence (2)
- Can immediately sell if no spouse/children under 18
- TIB has up to 3 years to sell and then reverts back to bankrupt (3 years from date of BO)
Role of Official Receiver (OR) - (5)
- Officer of the court
- Involved in every bankruptcy
- When BRO made, must investigate debtors affairs and report to creditors
- BRO usually appoints OR as receiver
- Decides whether to call creditor meeting
Trustee in Bankruptcy Role (4)
- Realise assets
- Pay creditors
- Follow priority order if needed - SEPCUID
- Discharge bankrupt
How long does a BO normally last?
- 12 months
What restrictions on an individual subject to a BRO
- Can’t get credit of £500 or more from single lender without declaring bankruptcy
- Can’t act as director or get involved in running a company without permission from the court
- Can’t carry out business under a different name without telling everyone about bankruptcy
- Can’t act as insolvency practitioner
What must a bankrupt not do? (7)
- Hide assets
- Destroy records
- Make false statements
- Sell assets to defraud
- Give preference to creditors
- Leave UK
- Take assets outside of UK
Bankruptcy and MWPA - interaction
- TIB cannot claim policy proceeds (in trust) even if to defraud creditors
- In that case, premiums could be reclaimed
Transfer into Trust and subsequent bankruptcy:
- Within 2 years (2)
- Within 5 years (
- More than 5 years (1)
Within 2 years - Can be set aside. No need to prove insolvency at the time nor that it was to deprive creditors
Within 5 years - Can be set aside if ben’s include associates/business partners
- no need to show intent to deprive creditors
More than 5 years - likely to be safe
IVA Benefits (3)
- Less formal arrangement
- Less ongoing restrictions
- No bankruptcy stigma
IVA Procedure
- Debtor makes formal proposal to creditors
- If creditors agree, insolvency pract appointed, to oversee payments
- Debtor and IP set out plan
- Creditors meeting held, IP sets out plan,
- If creditors representing 75% of debt agree then all creditors bound by agreement
- If not then BRO can apply
- IP makes payments to creditors
- Once all paid, IVA ends
- Normally after 5 years
