SPA - Dispute Resolution

Question 1

What happens if the losing party doesn’t pay the judgment in High Court?

Answer 1

Interest accrues at the rate of 8% per annum from the date of the judgment until the award is paid

Question 2

When is interest payable on a County Court judgment?

Answer 2

Only if the judgment is over £5,000.

Question 3

When can a County Court judgment be transferred to the High Court? Why?

Answer 3

A County Court judgment over £600 can transfer to the High Court for enforcement so that interest can be collected

Question 4

What can a judgment creditor apply to the court for?

Answer 4

May apply for an order requiring a judgment debtor to attend an oral examination in order to provide information about their means and assets

Question 5

What notice of the court order for an oral examination is needed?

Answer 5

The judgment creditor must serve the court order personally on the judgment debtor not less than 14 days before the oral examination hearing.

Question 6

What must the judgment creditor do before the oral examination hearing takes place?

Answer 6

The judgment creditor must file an affidavit not less than 2 days before the hearing providing details of service + stating how much remains unpaid.

Question 7

What is issued by the court to an enforcement agent in the High Court?

Answer 7

A writ of control

Question 8

What is issued by the court to an enforcement agent in the County Court?

Answer 8

Warrant of control

Question 9

What does a writ of control or warrant of control do?

Answer 9

It is issued by the court to an enforcement agent + allows them to take control of a judgment debtor’s property in order to sell it to satisfy the judgment.

Question 10

What notice must the creditor give if they intend to take control of the debtor’s goods?

Answer 10

The creditor must give the debtor at least 7 days’ notice of the intention to take control of goods/

Question 11

How is the creditor’s control agent restricted in taking control of assets?

Answer 11

The creditor’s control agent can enter only the stated address + must provide an inventory of any goods seized.

The goods must be seized within 12 months of the notice.

Question 12

When must the creditor’s control agent sell goods taken from the debtor?

Answer 12

The agent must sell the goods within 7 days of the seizure with the proceeds used to discharge the debt plus enforcement costs.

Question 13

What can a creditor’s control agent not seize?

Answer 13

The creditor’s agent cannot seize:
i. equipment for use in the debtor’s trade, or
ii. household items necessary for basic domestic needs.

Question 14

What can the creditor do if the judgment debtor has money in a bank?

Answer 14

The creditor can obtain a third-party debt order that the bank pays the money to them instead of to the debtor.

Question 15

What can be done in commercial cases where the debtor is owed money by a third party?

Answer 15

The creditor can obtain a third-party debtor order, where the third party will pay the debt directly to the judgment creditor rather than to the debtor.

Question 16

What may the creditor do if the judgment debtor has an interest in land?

Answer 16

A creditor may obtain a charging order which will give the creditor the right to apply for an order of sale.

This can apply even if the land is in joint ownership.

Question 17

What can the creditor do if the judgment debtor is an individual in regular employment?

Answer 17

A creditor may apply to the County Court for an attachment of earnings order to compel the debtor’s employer to make regular deductions from the debtor’s earnings + then pay them into court.

Question 18

What is insolvency?

Answer 18

A term that indicates a person or business is unable to pay their debts

Question 19

What options are available to a sole proprietor or partnership if insolvent?

Answer 19

1. Negotiate with creditors for more time to pay or a reduction in what must be paid,
2. An Individual Voluntary Arrangement (IVA)
3. Bankruptcy

Question 20

Who drafts an IVA?

Answer 20

A debtor may not draft an IVA on their own but rather must instruct an insolvency practitioner.

Question 21

What will the insolvency practitioner do?

Answer 21

1. Have the debtor prepare a statement of affairs,
2. Apply to the bankruptcy court for an interim order which prevents creditors from filing a bankruptcy petition,
3. Prepare a report advising whether there is a realistic chance a proposal can be crafted that might be accepted and calling a meeting of creditors, and, if so, call the meeting
4. Supervise and implement the plan

Question 22

What approval does an IVA need?

Answer 22

An IVA requires approval of the creditors owed at least 75% of the unsecured debt owed by the debtor.

Question 23

Who is an IVA binding on if approved?

Answer 23

Binding on all ordinary unsecured creditors.

Preferential creditors + secured creditors aren’t bound unless they agree to the proposal.

Question 24

What are preferential creditors?

Answer 24

Employees owed holiday pay or wages due in the last 4 months

Question 25

What happens if a debtor fails to comply with the IVA or provided false or misleading information?

Answer 25

The supervisor or any creditor who is a party to the IVA may petition for the debtor’s bankruptcy

Question 26

What is bankruptcy?

Answer 26

Bankruptcy is a judicial process in which the assets of the bankrupt debtor are passed to a third party, the trustee in bankruptcy, who liquidates the assets, and uses the money from the liquidation to pay off as many of the debtor’s debts as possible.

Question 27

What must be done once an application for bankruptcy is made?

Answer 27

The debtor’s creditors must stop chasing the debtor + the debtor will be discharged from most of their debts after 1 years.

Question 28

What are the various ways a debtor can be declared bankrupt? (brief)

Answer 28

1. Debtor can apply online for a bankruptcy order
2. Unsecured creditors owed at least £5,000 can submit a petition for a bankruptcy order
3. Creditor owed liquidated debt for £5,000 + issues statutory demand for payment
4. Future liability of more than £5,00 and creditor serves statutory demand for proof of ability to pay
5. Creditor seeks to execute judgment if owed judgment debt of more than £5,000
6. Supervisor of IVA

Question 29

What must be shown if one or more of the debtor’s unsecured creditors submit a petition for a bankruptcy order?

Answer 29

They are owed at least £5,000.

The application must prove that the debtor is insolvent (unable to pay their debts) by showing either that:

i. the debt is payable immediately + the debtor doesn’t have funds to pay, or

ii. the debt is payable in the future + the debtor has no reasonable prospect of being able to pay

Question 30

What is needed for bankruptcy if a debtor is owed a liquidated debt?

Answer 30

Liquidated debt must be for £5,000 or more.
The creditor may then make a statutory demand for payment.

If the debt is not paid within 3 weeks, or the debtor doesn’t apply to set aside the statutory demand within 3 weeks, the debtor will be deemed insolvent.

Question 31

When may the debtor owing a future liability lead to bankruptcy?

Answer 31

If a debtor owes a future liability of more than £5,000, the creditor may serve a statutory demand for proof of ability to pay + the debtor doesn’t:

1. show a reasonable prospect of being able to pay the debt when it falls due, or
2. apply to court to set aside the statutory demand,

The debtor will be deemed insolvent.

Question 32

When can bankruptcy arise out of a judgment debt?

Answer 32

If the debtor owes a judgment debt or more than £5,000, the creditor can seek to execute on the judgment.

If the attempt fails, the debtor will be deemed insolvent.

Question 33

When can the supervisor of an IVA petition for a bankruptcy order?

Answer 33

If the debtor is in default of the IVA

Question 34

What happens if the bankruptcy order is made?

Answer 34

An official receiver is appointed who will act as the trustee in bankruptcy unless the creditors seek to appoint their own trustee.

Question 35

What happens to the majority of the debtor’s property once declared bankrupt?

Answer 35

It will automatically vest in the trustee

Question 36

What is the bankrupt entitled to keep?

Answer 36

1. Things needed for day-to-day living,
2. Tools required for their job,
3. Their salary

Question 37

What may a bankrupt not do during bankruptcy proceedings?

Answer 37

1. Apply for credit over a prescribed amount,
2. Act as a company director,
3. Be a partner
4. Trade under another name

Question 38

What order will the trustee pay creditors in?

Answer 38

1. Costs of the bankruptcy,
2. Preferential debts, including employee wages for 4 months + money owed to HMRC for VAT, PAYE, and National Insurance contributions,
3. Ordinary unsecured creditors,
4. Postponed creditors (spouse/civil partner)

Question 39

When will a bankrupt be considered ‘culpable’?

Answer 39

If a bankrupt has caused the bankruptcy by their own:
a. dishonesty,
b. negligence, or
c. recklessness

Question 40

What is the effect of being a culpable bankrupt

Answer 40

Can be subject to a court bankruptcy order for up to 15 years

Question 41

What happens if the bankrupt is a partner in a general partnership at will?

Answer 41

It will be dissolved on the bankruptcy of the partner + the partner’s share of assets will be turned over to the trustee.

Question 42

What happens if the bankrupt partner is a partner is a general partnership for a specified term or undertaking?

Answer 42

The partnership will continue and usually the remaining partners will purchase the insolvent partner’s interest.

Question 43

What can the bankrupt not do if they are a member of an LLP?

Answer 43

They cannot participate in the management of the LLP

Question 44

What happens if a general partnership itself is insolvent?

Answer 44

The partnership is wound up using the same processes as for bankruptcy.

Question 45

What happens if an LLP is insolvent?

Answer 45

It is wound up in the same way as a company.