Module 12 - Personal Insolvency Issues Flashcards
2 Things to Disclaim
Land / Building - Dumped waste, environmental issues, lease on property, licenses to maintain
Onerous / Unprofitable Contracts - HP agreements, time share, business giving warranties
What is the process to Disclaim property?
Trustee in Bankruptcy (TinB) delivers Notice of Disclaimer to Court
Notice is authenticated and signed by Trustee
Identifies all property to be disclaimed
Trustee files one copy in Court
Another copy goes on Bankruptcy File
Copy also goes to Land Registry (if land being disclaimed)
Within 7 Business days…
TinB shall send copies to every person who claims as an underlessee (for leased property)
Or to everyone in occupation or claims a right to live there
May deliver a copy at any time at any person who ought to be informed
Those suffering loss or damage will be an unsecured creditor
How many days notice does a Landlord need to give to the Trustee to make a decision about whether or not to disclaim a lease?
28 days
How many days does a Trustee have to disclaim a lease after receiving a notice to make a decision?
28 days otherwise they will be deemed to have adopted that property or contract
3 Consequences of Disclaimer
Ends contracts, rights, interests, and liabilities;
Liabilities AND rights of the parties end (Trustee cannot disclaim and then sell lease);
If lease disclaimed gives rise to breach of contract claim, landlord cannot then receive damages for entire unexpired term as double benefite
What is Distress?
Common law right for a landlord to automatically enter the premises of a tenant and take ‘walking possession’ over their assets without recourse to the Court
What is CRAR?
Commercial Rent Arrears Recovery. A commercial landlord cannot distrain and is required under this statute to be owed 7 days rent ad give 7 days notice of the action. Recovery must be made by a HCEO. Distress remains a right for other non-commercial premises
What is Execution?
The ability for any creditor to apply to Court, having first obtained judgement for a debt, to instruct a HCEO to attend both commercial and private properties to take possession of goods in lieu of the debt.
What are the 3 different time periods for Distress / CRAR?
Pre-Petition but within 3 months of Bankruptcy Order;
Between Petition and Order;
After Order but before Discharge
In Option 2 of Distress/CRAR, what can a Trustee clawback?
Anything in excess of 6 months rent (the landlord will keep the most recent 6 months)
In option 2 of Distress / CRAR - explain the difference between Second ranking pref and unsecured claims for a landlord.
Good luck…
Any rent clawed back in excess of 6 months = unsecured;
The shortfall to pay preferential creditors after the excess 6 month rent calculation = second ranking preferential
What are the Distress / CRAR rules for Option 3?
Landlord entitled to keep 6 months rent;
Landlord entitled to distrain / CRAR for new arrears without restriction;
No action can be taken after the Bankruptcy is discharged
Rules for Execution
If action is not completed before the commencement of Bankruptcy it must cease;
Any unsold monies / assets held by a HCEO must be delivered to Trustee;
If assets are sold, the HCEO must hold them for 14 days;
If notice of petition or application is received, the funds must be passed to the Trustee, less costs
What section is Set Off?
Section 323? If there have been mutual dealings, an account shall be taken of what is due from each party in respect of mutual dealings, and the sums will be set off
Define Liens
A person who is owed money by a debtor remains unpaid … and has possession of some of the debtor’s property
