Personal Insolvency Flashcards
When is a person insolvent?
Under s 267 IA, a person is insolvent when:
A debt is payable NOW, but the debtor does not have enough money to pay it,
OR
A debt is payable in the future and there is no reasonable prospect that the individual wil be able to pay it
Which section of IA proves persona insolvency?
S 268
What are the 3 ways that a creditor can prove that an individual is insolvent?
By serving a statutory demand on the debtor for a liquidated sum of 5000 or more. And wait 3 weeks to see if the debtor pays, or applies to court to set aside the statutory demand
By serving a statutory demand on the debtor in respect of FUTURE liability to pay a debt of 500 or more, and wait 3 weeks to see if they:
Show a reasonable prospect of being able to pay the sum when it falls due, or
Apples to court to set aside the statutory demand
By obtaining a court judgement for a debt of 5000 or more, and attempting execution of judgement without success
What are the options for an insolvent person>
They can try talking to their creditors to come to an agreement.
They can apply for their own bankruptcy, to show that they are trying to take control of the situation themselves.
They could enter into an IVA, individual voluntary arrangement, or apply fr a debt relief order.
What is bankruptcy?
This is the process whereby the debtors assets pass to a trustee in bankruptcy, whose job it is to pay as many of the dbets as possible to the debtors creditors.
After one year, the bankruptcy is discharged, meaning that it ends and the bankrupt is free from almost all their debt, even if they have not repaid in full.
What is the bankruptcy procedure?
By a creditor presenting a petition at court
Or
By the debtor applying for their own bankruptcy online
When can a creditor present a bankruptcy petition at the court?
If they are owed 5,000 or more.
This must be liquidated. The creditor must also show that the debtor is unable to pay their debt, or has little prospect of being able to pay their debt.
Can creditors join together to petition a bankruptcy?
Yes, creditors can join together, provided the total amount owed eto all petitioners is not less than 5,000
How does a debtor apply for bankruptcy?
Must apply online. An adjudicator will decide whether to make a bankruptcy order or not
What is the grounds for a bankruptcy order on the debtors own application?
Debtor is unable to pay ther debts. In addition to the fees for application, debtor also needs to pay a deposit of the Official Recievers administration fees.
How long after debtors applciation must the adjudicator make a bankruptcy order or refuse it?
Within 28 days from the application.
In practice, usually 48 hours.
Who is the official receiver and what do they do ?
Once a bankruptcy order has been made, the OR acts as a TRUSTEE in bankruptcy, and takes control of the bankrupts assets.
The OR is employed by teh insolvency service and is an officer of the court.
OR will ask the debtor for statements of affairs and financial position, and take investigations into debtors financial affairs.
What property is the bankrupt able to keep?
Trustee is permitted to keep some assets that are needed for day to day living - items you need for work, every day household items - clothing, furniture.
HOWEVER< if these are high value, trustee can sell them and replace with a cheaper altneriatve
Are bankrupts entitled to be paid their salary?
Yes, but if their salary is more than what is sufficient to meet the reasonable needs of the bankrupt and their family, the truste can ask the bankruptcy to tenter into IPA, income payment agreements.
What is an IPA
This is an income payment agreement, which requires bankrupt to pay some of their salary to the trustee, ot meet their liabilities.
What is an IPO
If the bankrupt and a trustee cannot agree on an IPA, the trustees can apply to cour or an income payment order, IPO, and the court will decide.
What happens to a bankrupt’s home?
If the bankrupt is a home owner, their interest in that home passes to the trustee. If someone else has a elgal or equitable interest in the house, or right of occupation, the bankrupt cannot be evicted straight away, and the trustee needs a court order to sell the house.
What does the court take into consideration when deciding to sell a bankrupts house?
The court will weigh up al relevant circumstances, including interest of the creditors, conduct, the needs of current or former spouse, and the needed of any children.
After one year of bankruptcy, the creditors interest outweighs those of anyone else living in the house.
How long after bankruptcy order, does the ownership of the bankrupt house transfer back from trustee?
3 years after the bankrupt order, UNLESS trustee has:
- sold the prperty
- applied for an order for sale or possession or charging order
- entered into an agreement with the bankrupt regarding the home.
What is the trustees duties during bankruptcy?
Duty is to the creditors, and they have the power to investigate into the bankrupts affairs and challenges, with a view to increasing the assets available to repay the creditors.
What can the trustee choose to do, when trying to increase assets available to creditors?
Disclaim onerous property
Apply to set aside transactions at undervalue
Apply to set aside preference
Apply to set aside transactions defrauding creditors
Avoid extortionate credit transactions
What is disclaiming onerous property?
Trustee may disclaim onerous property.
Examples: unprofitable contracts, land that has been burdened of an onerous covenant, or a leaes that does not have capital value.
The trustees disclaimer means that all of the bankrupts rights and liabilities come to an END, and the trustee is discharged from personal responsibility for the property.
