Personal insolvency

Question 1

What are the formal personal insolvency arrangement?

Answer 1

Individual voluntary arrangement
Bankruptcy

Question 1

What is the process for an IVA?

Answer 1

1. debtor drafts proposal and statement of affairs
2. nominee submits report to court
3. Debtor can apply for interim moratorium order
4. approved by at least 75% in value of creditors unless more than half not associated vote against

Question 2

Who can an IVA bind?

Answer 2

Unsecured creditors
Secured/preferential if they consent

Question 3

What are the requirements for a creditors petition for bankruptcy?

Answer 3

• Debtor unable to or no reasonable prospect of paying debts
• Unsecured liquid sum >£5,000
• Debtor domiciled/present in E&W

Question 4

What are the requirements for a debtors petition for bankruptcy?

Answer 4

• Debtor unable to pay debts
• Petition accompanied by statement of affairs

Question 5

How is an individual’s inability to pay its debts evidenced?

Answer 5

• Statutory demand neither satisfied within 3 weeks from service of demand nor set aside by court
• Unsatisfied execution of a judgement or another legal process

Question 6

What is the order of priority for bankrupt individuals?

Answer 6

1. secured creditors
2. expenses
3. preferential creditors
4. unsecured creditors
5. statutory interest
6. debts to spouse
7. surplus to bankrupt

Question 7

When is bankruptcy generally automatically discharged?

Answer 7

Max period of 1 year

Question 8

What is the consequence of failure to comply with bankruptcy duties

Answer 8

Criminal offence
Risk of losing automatic discharge

Question 9

What can the secretary of state order against a bankrupt considering their conduct?

Answer 9

Bankruptcy restriction order

Question 10

What are the voidable transactions which trustees of a bankrupt can challenge?

Answer 10

• Transactions at an undervalue
• Preferences
• Transactions at an undervalue defrauding creditors

Question 11

What is a transaction at an undervalue?

Answer 11

• Gift
• In consideration of marriage/civil partnership
• Worth less than consideration given by bankrupt

Question 12

What is the relevant time for a transaction at an undervalue?

Answer 12

5 years before presentation of bankruptcy petition

Question 13

Is insolvency required for a transaction at an undervalue?

Answer 13

Yes where transaction 2-5 years before petition

Question 14

Is there a presumption for a transaction at an undervalue?

Answer 14

Insolvency presumed where transaction with an associate

Question 15

What is a preference?

Answer 15

• The person is a creditor and
• They do something/suffer something putting them in a better position than if the individual was made bankrupt
• individual was influenced by desire to prefer creditor

Question 16

What is the relevant time for a preference?

Answer 16

within 6 months before presentation if unconnected,
Within 2 years before presentation if associate

Question 17

Is insolvency required for a preference?

Answer 17

Must be insolvent at time of preference or become insolvent as a result