Bankruptcy of Individuals Flashcards
What is a key negotiation strategy with creditors to help a business survive?
Negotiate for more time to pay or reduction in debt, though promises may be unenforceable without consideration.
What is an Individual Voluntary Agreement (IVA)?
A binding agreement where creditors accept reduced payments or different terms. Requires an insolvency practitioner.
Who must draft the IVA proposal and what is their role?
An insolvency practitioner (IP) drafts the IVA proposal, applies for an interim court order, and supervises the IVA.
What percentage of creditors must approve an IVA for it to be binding?
Approval requires either half of the creditors by number or creditors owed at least 75% of the unsecured debt.
What happens if a debtor fails to comply with the IVA?
The supervisor or any creditor can petition for the debtor’s bankruptcy.
What is bankruptcy?
A judicial process where a trustee in bankruptcy (TIB) liquidates the debtor’s assets to pay off debts in a statutory order.
How can a bankruptcy order be obtained?
(i) Debtor applies online; (ii) Unsecured creditor(s) owed at least £5K petitions; (iii) Supervisor of IVA petitions.
What must creditors do once a bankruptcy application is made?
Creditors must stop chasing the debtor.
What is the role of the official receiver in bankruptcy?
Acts as the trustee in bankruptcy (TIB) and manages the liquidation of the debtor’s estate.
What can a bankrupt keep during proceedings?
Items needed for daily living, job tools, and salary.
What must a bankrupt not do during bankruptcy proceedings?
Apply for credit above a certain amount, act as a company director, be a partner, or trade under a different name without disclosure.
How long does bankruptcy last?
Bankruptcy is automatically discharged after one year.
In what order are creditors paid in bankruptcy?
- Costs of bankruptcy; 2. Preferential debts (employees); 3. Ordinary unsecured creditors; 4. Postponed creditors.
What are the consequences of bankruptcy caused by dishonesty or negligence?
The bankrupt can face a court order extending bankruptcy for up to 15 years.
What happens to a partnership when a partner goes bankrupt?
If at will, it dissolves; if for a term, the remaining partners may purchase the bankrupt partner’s interest.
