Bankruptcy Flashcards
What is a Debt Management Plan and typically when used
When can it be used
How set up
- Agreement between debtor and creditors to pay off debts -typically when debtor can afford to make small repayments, but will be able to resume normal payments in future
- Can only be used in connection with unsecured debts
- Either set up by debtor or via Debt MAnagement Company
- DMP can be cancelled by creditors if payments note maintained
What is an Administration Order
When can it be used - 4 points/factors
How set up , by who, details
Additional info
- Agreement with court . Debtor makes one payment to court and then divided out
- Debt must be…alternative to bankruptcy
Debt Less than £5,000
Debtor must owe money to at least 2 creditors
Must prove they can afford payments
Must be County or High Court judgement - Debtor completes admin order and returns to court: court decides how much debt to repay, monthly payment and for how long= court charges administration fee up to 10%
Debtor may be able to keep running business. Court can ask employer to take money from wages. AO is added to register of judgements. Removed 6 years after the order was made
What is an Individual Voluntary Agreement (IVA)
When can it be used
How set up
Additional information
- An agreement between debtor and creditors via Insolvency Practitioner (IP). Debtor make monthly payment to IP who then divided amongst creditors
- Debtor makes a formal approach to creditors and applies to court
- 75% by value of creditors (meeting held)must agree to IVA. Then applies to all creditors (even those who oppose)
less formal
-Normally last 5 years. - Set up via the IP .IP works out how much debtor can afford and how long IVA should last. Then contact creditors and attempt to gain agreement
- IP monitors payments
- May be able to continue business. IVA stops creditors taking action against debtor (Grant of interim order) . If debtors fail to keep up payments, can be cancelled. IVA added to individual insolvency register. Removed 3v months after IVA ends
What is a Debt Relief Order
When can it be used
How set up
Additional info months
- Agreement made through Official Receiver where someone has debts of less than £20,000 and limited assets to repay -through authorised debt adviser
- Debts must total less than £20k, debtor must have less than £50 pm spare income, debtor must have assets less than £1k and can’t own own home, must have lived or worked in England & Wales within last 3 years
- Couldn’t have applied for DRO in last 6 months
- Lasts for 12 months , then normally free of debt
- Applications made to Official Reciever. Must through authorised debt adviser
-Holder of DRO can’t: borrow more than £500 without telling lender
Act as director of company
Create, manage or promote a company without court’s permission
Manage a business without telling those you do business with about the DRO
Restrictions last 12 months
- DRO added to Insolvency register. Removed 3 months after DRO ends
- DRO stays on credit record for 6 years
- Parties to Debt management plan and how debt recorded
- Admin Order
- IVA
- DRO
Bankruptcy
- DMP - Debtor and creditor (possible debt management company)
- Admin order - Court. (Added to register of judgements - 6 years from order
- IVA - Insolvency practitioner (IP)and creditors. Added to Insolvency register. Stays on 3 months after
- DRO - Official Receiver makes agreement. Applied via debt adviser. Stays on credit record for 6 years. On Insolvency register for 3 months after DRO ends
Bankruptcy;
Trustee in Bankruptcy - Stays on Insolvency register for 3 months after discharge. 6 years from date of bankruptcy on credit reference.
Bankruptcy
Individual : How apply, when
Third party application:
- Where apply to and for what (what’s it called)
- Amount
- What check
- if granted what awarded
Individual:
- Can apply online with fee - No minimum amount owed
- Considered by adjudicator
Third party:
- Apply to court for a petition
- Applicant must prove they are owed £5k (or share of £5k)
- Must check no other bankruptcy petitions
- debtor not complied with 3 weeks to statutory demand requiring payment
- bailiffs Was Unable to collect
Restrictions placed on bankrupt (5)
How long
Restrictions:
- Borrow more than £500 without telling lender they are bankrupt
- Act as Director without permission
- Create, manage or promote a company without permission
- Manage a business with a different name without telling
- Work as insolvency practitioner
Last as long as bankruptcy ….can be extended if doesn’t carry out duties under proceedings or careless/dishonest
Bankrupts assets
- What can they keep (2)
- What do they give to Official receiver
- Pension
- Home- When must it be returned to bankrupt; When can house sale be stopped (3)
Can keep:
- Items for job (tools car)
- Household items (clothes, bedding)
Give to OR:
- Bank card , cheque book,credit cards
pension : keep money but income can be used
Home:
- Returned to bankrupt if not put up for sale in 3 years; stopped/delayed 1. Equity less than £1k 2. Can be sold to partner 3. Organise somewhere for kids and partner to live (delay 1 year)
Income Payment Agreement (IPA)
What and when used -How long
Income Payment Order
What and when used
IPA:
Trustee will inform bankrupt if they have to make monthly payments out of disposable income (only if affordable). Can be used up to 3 years
IPO:
If bankrupt doesn’t agree. Court order
Ending a bankruptcy
What is term for when ends:
- Duration;when longer
- When end sooner (3)
- Where is bankruptcy recorded and when removed
- what debts may not be cleared after 1 year
Bankruptcy ends when bankrupt is discharged
- Last 1 year (normally) - could be longer if non cooperation
Free of debt even if not paid in full
- Application cancelled 1. Should not have been made bankrupt 2. paid all debts and fees 9or guaranteed by 3rd party) 3. Individual makes IVA
- Recorded on Insolvency register. Removed within 3 months of discharge, stays on credit reference up to 6 years and can apply to remove details from land registry after 5 years
May not be cleared if ; damages owed through personal injury,maintenance/matrimonial,student loan, fines or debts arising from fraud
If Bankrupt has to make monthly payments out of spare income
What are 2 possible ways
IPA - income payment agreement
IPO - income payment order
Bankrupts home
How long does TIB have to sell …or what do they need to have
TIB has 3 years to sell - after doesn’t form part of bankrupt estate - reverts to bankrupt ..unless TIB
Realises interest, apply for possession order or charging order, or enter agreement
Tib can only claim debtors interest - if joint other party may have legal interest. Must apply for court order
- If joint tenancy, it is severed. TIB could sell to somebody else (could be other joint tenant)
- House cant be sold without court order. Court will consider needs of Bella as she has legal interest in property
A bankrupt must not …(7)
- Hide debts from TIB
- Destroy or falsify records
- Make false statements
- sell assets to defraud creditors
- Leave UK
- Take assets outside UK
Official receiver
Trustee in bankruptcy
- take control of assets after bankruptcy awarded
- decides whether to call creditors meeting
(Enables creditors to appoint insolvency practitioner as Trustee in bankruptcy) - Must call meeting if 10% by value owed demand it
- No meeting OR acts as Trustee in bankruptcy
Payments to creditors- order
- Secured creditors
- Expenses of bankruptcy
- Preferential debts )Cap of £ 800 per employee
- Any creditor holding floating charge
- Unsecured creditors
- Interest due on all debts
- Debts to partner
