personal insolvency sequestration Flashcards
what is insolvency
insolvency is when a legal person is unable to meet their obligations to creditors
- the law aims to ensure creditors are treated equally. Gives creditors the opp to cut their loses in an equitable manner.
pracitcally insolvent
you are in debt but have a means to pay it off
absolute insolvency
when a debtors total liabilties exceed his total assets
apparent insolvency
gives creditors ground for sequestration
- the debtor gives written notice he can’t pay his debts
- the debtor grants a trust deed, a decree of adjuducation is granted against any part of his estate
- apparent insolvency will be cosstituted where any of the partners is apparently insolvent for a debt of the partnership.
the difference between an entity debtor and a natural debtor
- an entity debtor can apply to the AiB to sequestarte his estate with the concurrence of a creditor
- a natural person can apply to the AiB to sequestrate their own estate
what is the debt total for sequestration
£3,000
the functions of a trustee
- recover, maange and realise the debtors estate
- to distribute the estate amongst the creditors according to their respective entitlements
- to ascertain the reasons for the debtors insolvency and circumstances surrounding it
- ascertain the state of the debtors liabilities and assets
should only be performed if it is of financial benefit to the estate of the debtpr
property and income
for heritable prop the act and warrant must be registered against the title of the prop
prop which the creditor has sold in trust can’t be vested
any income recieved by the debtor will not vest unless it has been derived from his assets
personal effects on the debtor
not allowed to leave scotland
not allowed to obtin credit over £500 without advising the debtor of the sequestration.
can’t practice as a solicitor
the powers of the trustee
- carry on the debtors business
- bring defend or continue any legal proceedinfs related to the debtors estate
- create a right in sec over any part of the estate
- make payments or incur liabilities in order to acquire prop which is subject to a real right or option
- borrow money
- and effect or maintain insurance policies
- can dopt or decline to adopt any contract entered into by the debtor prior to sequestration.
gratuitous alienation
- simple given away part of his estate
- their must be alientation meaning transferred something out of his estate
- made within 2 years for a non associate an d 5 years for an associate
- transfer will be considered to have taken place on the date of which it becomes effectual
- if can demostrate that it was a permitted gift then the transaction will stand
the 3 options for the court for gratuitous alienation
- order reduction of the deed effecting the transfer, which would be the normal remedy for heritable prop
- to order restoration of the prop to the estate, which would be the normal remedy for moveables
- or the grant such othe redress that may be appropriate.
unfair preferences
a debtor has dishonest behaviour in collusion with a creditor.
any action but the debtor which favours a creditor may fall within this category.
can challenge any unfair pref granted in the 6 moths prior to the date of sequestration
categories which cannot be seen to be unfair preference
a) a transaction in the ordinary course of trade or business
b) a payment in cash for a debt which had fallen due - unless the action was collusive
c) a transaction where the debtor and the creditor undertake reciprocal obligations
d) the grant of a mandate by the debtor to pay over arrested funds
the 3 options for the court for unfair preferences
- order reduction of the deed effecting preference
- order restoration of the prop to the estate
- grant siuch redress as may be appropriate
