Bankruptcy Hearings

Question 1

What is the legislation for Bankruptcy Hearings?

Answer 1

Insolvency Act 1986 part 2

Insolvency Rules 2016

Question 2

What is a secured creditor?

What is an unsecured creditor?

Answer 2

Creditor who has their debt secured against a particular asset owned by the Debtor (e.g Mortgage)

Creditors who do not hold any specific security in relation to their debt. Instead, they rely upon the general assets of the Debtor to be able to recover the debt.

Question 3

SECURED CREDITORS:

What is the difference between fixed security and a floating security?

Answer 3

Fixed security is secured on an particular asset.

Floating is a charge that is secured generally against the debtor’s assets, without being exclusively attached to any individual asset. When chage is called in the charge attaches to a specific asset

Question 4

UNSECURED CREDITORS:

What are 2 types?

Answer 4

Priority debts and non-priority debts

Question 5

List of priority debts under …

Creditor owed a a debt of these types…

All funds are distributed evenly between…

Answer 5

Schedule 6 Insolvency Act 1986

…takes priority over other creditors

Debts of the same priority

Question 6

How are costs occasioned with in bringing the bankruptcy or in administrating the bankrupt’s estate dealt with?

If Trustee incurred costs in selling or realising the security these costs have …

Answer 6

These costs are given absolute priority — these costs are recovered from available estate before any unsecured creditors’ debts

… priority over even secured creditors (under schedule 6)

Question 7

If there are insufficient assets to satisfy all the Creditors in one individual class, then the available funds will be …

Answer 7

distributed evenly amongst those Creditors, regardless of debt size.

Question 8

Discharge from bankruptcy occurs automatically at the end of the period of _______ after the order is made

Answer 8

One year

Unless court suspended running of that period

Question 9

Upon discharge the bankrupt will be discharged ….

Answer 9

from liability for any debts that remain unsatisfied.

Question 10

Discharge dose not affect the rights of who?

Answer 10

Any secured creditor to enforce security (s.281(2) IA ‘86)

Question 11

What is a individual voluntary arrangement?

Answer 11

Formal repayment proposal presented to Debtor’s Creditors via an insolvency practitioner

Contractual arrangement between debtor and creditors

Question 12

Who can obtain a bankruptcy order?

What must debtor also file?

Answer 12

Creditor or debtor can present a bankruptcy petition

Must file a statement of affairs

Question 13

IF a creditor petitions for bankruptcy what must they show?

Answer 13

that the Debtor owes them at least £5,000 and that the Debtor is unable to pay the debt that is due and owing.

Question 14

On what grounds can a petition be brought?

Answer 14

1. Debtor has failed to comply with a statutory demand and time for compliance (21 days) or application to set aside (18 days) has expired
2. Debt is payable under a judgment and other process issued to enforce but failed
3. Individual voluntary arrangement made and debtor failed to comply

Question 15

What must a statutory demand contain?

Answer 15

Details of the debt

And a statement that if the debtor does not comply with the demand bankruptcy proceedings may be commenced”

Question 16

How many days must a creditor wait after sending a statutory demand to a Debtor before issuing a Petition at Court?

Answer 16

21 days (pursuant to s.268 IA 86)

Question 17

How should a statutory demand be issued?

Answer 17

Personal service if practicable: creditor is under obligation to do all that is reasonable to bring demand to Debtor’s attention via personal service

If this been done but unable to effect personal service, can by done by substitute method

Question 18

What is sufficient proof of service of the demand ?

Answer 18

Certificate of service verified with a statement of truth by teh person who effected service

Question 19

What can debtor do upon receipt of statutory demand?

Answer 19

Challenge the demand;
Comply with demand;
Not respond

Question 20

What must debtor do to challenge statutory demand?

Answer 20

Make an application to set the demand aside together with a W/S in support within 18 days of service of the demand

Court will dismiss or fix hearing

Question 21

What does debtor have to do to comply with demand?

What can the Creditor not do

What is debtor reduced debt to below 5,000

Answer 21

Pay sum due within the specified 21 days — then matters is at an end between those parties

Or enter agreement to pay a proportion of the debt

Creditor cannot reject reasonable offers to secure/compound debt because then would no be able to prove their grounds in insolvency proceedings

If below £5000 creditor will not be entitled to present petition based on statutory demand

Question 22

What is a certificate of continuing debt?

Must be provided for every _______ hearing

Answer 22

Statement signed by petitioning creditor which confirms the debt is still due and owing

Adjourned

(Blank copy available on network)

Question 23

What is the list of creditors?

What is there are no other creditors?

Answer 23

List of any creditor that have given notice that they intent to appear for each hearing + indication if they intention to support or oppose the petition

If no other or Creditor is not aware of any others, negative (blank) list still needs to be produced

Question 24

What must the petitioning creditor do if the hearing is adjourned?

Answer 24

Send notice of the adjournment to the Debtor and any other Creditors who has given notice that they wish to attend ASPA - even if debtor was in attendance

Question 25

What statutory provision governs the making of a bankruptcy order

Answer 25

S. 271 Insolvency Act 1986

Question 26

What must the court be satisfied of to make a bankruptcy order?

Answer 26

Court must be satisfied that the debt is payable, has not been secured or compounded OR the debtor has no reasonable prospect of being able to pay it when it falls due

Question 27

The _________ is evidence that the debt is due and owing and the fact that the debtor has not _____ since the service of the _____ raises the presumption that they are __________

Answer 27

Certification of Continuing debt

Paid / statutory demand / unable to pay the debt

Question 28

What discretion does the court have if the Debtor attends with proposals to make payments?

Answer 28

Court only have discretion to adjourn the petition for payment fo the debt if it is satisfied that the debt can be paid within a reasonable time

(Should seek instructions from instructing solicitors)

Court does not have the power to adjourn the petition generally, even if the order provides for monthly payments towards the debt

Question 29

What must be specifically noted within a bankruptcy order?

Why?

Answer 29

The time the bankruptcy order is made

Beachside from that minute onwards all the bankrupt’s assets vest in the official receiver/trustee

Question 30

Under s.271(3) Court does have discretion to dismiss the petition if …

Answer 30

It is satisfied the Debtor is able to pay debt. OR

Debtor has made an offer to secure/compound debt, which would have resulted in the dismissal of the petition if accepted, and offer has been unreasonably refused

Question 31

What amounts to unreasonable refusal?

Answer 31

Courts would need to be satisfied that:

no reasonable hypothetical Creditor in the position of the petitioning Creditor, and in the light of the actual history as disclosed to the Court, would have refused the offer and that the refusal was therefore beyond the range of possible reasonable actions in the circumstances

Question 32

What should be submissions be if: Debtor attends says they have evidence why the original debt is not owed by them

Answer 32

Consider:
- Debtor could have applied to set aside statutory demand and

• in any event, do their assertions amount to grounds for setting aside the statutory demand (is a genuine triable issue disclosed)

Question 33

What should be submissions be if: Debtor attends says they have evidence that a judgment debt should be set aside

Answer 33

The court hearing the bankruptcy application is not the appropriate forum to seek to go behind the judgment

Question 34

What is required to withdraw or dismiss proceedings?

Answer 34

Permission

Because bankruptcy viewed as a class action

Question 35

What is an application to take carriage ?

Answer 35

By another creditor to Take over the carriage of the petition (e.g due to delay)

Creditor making the application must have given notice of intention and the petitioning creditor must be seeking to adjourn/postpone/withdraw petition

Question 36

Under schedule 5, para 3 to the Insolvncy Rules 2016 Court has the same power as under ______ to …

Answer 36

CPR 3.1(2)(a) to shorten lengthen the time for compliance with any requirement under the insolvency rules

Question 37

What costs order should be sought if a bankruptcy order is made?

Because?

Answer 37

No appropriate to make an reference to or seek any order as to costs

Because costs are recovered form estate directly during administration of assets, as soon as order made the creditor has no remedy against person

If instructed appropriate wording would be ‘costs in the bankruptcy’ but unnecessary

Question 38

What costs order should be sought if adjourned or remains unsolved?

Answer 38

Ensure the costs continue to accrue so seek “costs in the petition”

Must be this, no just silent as to costs because costs will be recovered at a later date by creditor when proving debt in the bankruptcy

Question 39

What costs order should be sought if petition is withdrawn or dismissed

Answer 39

Court has power to make summary assessment of costs

Need to be a costs scheduled served at least 24 hours before the hearing