Module 10 - Personal Insolvency

Question 1

2 Types of Options available to a Debtor

Answer 1

Informal;
Formal / Statutory Options (Bankruptcy, Individual Voluntary Arrangements, Debt Relief Orders)

Question 2

What are the Informal Options for Individuals?

Answer 2

Informal Arrangement;
Debt Management Plan;
Remortgage;
Consolidation Loan

Question 3

Advantages of an Informal Arrangement

Answer 3

No Stigma;
Not Advertised

Question 4

Disadvantage of IA

Answer 4

Not binding in law;
Got to keep up with agreement - could be stressful, down to Debtor to stay on top

Question 5

Advantage of DMP

Answer 5

Uses intermediary (Debt Charity, Debt Management Company);
Combines all debt into 1 payment

Question 6

Disadvantages of DMP

Answer 6

Not binding;
Can last a long time;
Generally no debt forgiveness

Question 7

Advantages of Remortgage

Answer 7

Pays all debts in one go;
Likely lower interest rate;
Lengthens repayment terms

Question 8

Disadvantages of remortgage

Answer 8

Turns unsecured debt into secured;
“Risk of reoffending”;
Require equity in property;
May require additional survey and less return

Question 9

Advantages of Consolidation Loan

Answer 9

No stigma;
Can be v simple;

Question 10

Disadvantages of Consolidation Loan

Answer 10

Risk of Reoffending greater?
Loan company may require security

Question 11

Breathing Space Moratorium

Answer 11

Brought in 2020;
Minimum of 60 Days

Question 12

Eligibility Criteria for BSM?

Answer 12

Be an Individual;
Owe a qualifying Debt to Creditor;
Domiciled in England or Wales;
Not subject to a DRO;
Not be subject to Interim Order;
Not be an undischarged Bankrupt;
Not subject to another BSM, or had one in the last 12 months;
Not subject to Mental Health Crisis Moratorium

Question 13

In a BSM, a creditor cannot…

Answer 13

Take steps to commence legal actions;
Require debtor to pay interest;
Require debtor to pay fees / penalties;
Cannot instruct agent;
Take any enforcement action;
Contact the debtor in relation to the debt

Question 14

Procedure for BSM?

Answer 14

Debtor seeks advice from debt advice provider;
Debtor may apply to debt advice provider for BSM;
Debt Advice Provider assesses whether or not they meet the criteria;
Application to Secretary of State made;
Entry made on Individual Insolvency Register;
60 Days start at the date the Secretary of State registers it;
Known creditors are notified by Secretary of State

Midway review - between days 25 and 35 by Debt Advice Provider

Question 15

What are the Debt Advice Provider’s Considerations?

Answer 15

Debtor has insufficient funds or income;
It would benefit the debtor;
Debtor is eligible to enter debt solution during BSM;
BSM period is necessary to assess the solution which is most appropriate

Question 16

Criteria for a Debt Relief Order (9 of them)

Answer 16

Not a homeowner;
Domiciled in England and Wales;
Not an undischarged Bankrupt;
Not subject to Bankrupt Petition;
No Debt Relief Order in last 6 years;
Surplus income less than £75;
Debts less than £30,000;
Hold less than £2,000 in assets (car excluded - same limite);
No antecedent transactions in last 2 years

Question 17

2 Ways to Go Bankrupt

Answer 17

Debtor’s Application;
Creditor Petition

Question 18

Debtor’s Application to Bankruptcy

Answer 18

Section 272 and Rules 10.26 - 10.45;
Electronic Application with a fee of £150 to Adjudicator, with a deposit of £550;
10.37 - Adjudicator must deliver application for registration ASARP;
10.38 - Adjudicator makes verification checks;
10.39 - 10.41 - 28 days to make an decision on the application;
Can request more info within 14 days of initial application

Question 19

Creditor’s Petition Sections

Answer 19

264 - 265 : who can apply?
267 - 268 : content of petition (“inability to pay debts” and minimum £5,000 liquidated debt)
270 : expedited petition where there is danger of debtor’s estate diminishing

Question 20

Rules of Creditor Petition

Answer 20

10.1 sets out content and service of statutory demand;
10.7 - 10.10 - petitions must be verified by Statement of Truth (filed in court)
10.18 - if the debtor plans to oppose the petition, they must do so NO LESS THAN 5 DAYS before the hearing;
10.21 - the hearing. At least 1 days must elapse between service of petition and the hearing;
Section 266 - the court can grant or dismiss the petition