
Restructuring & Insolvency
Bankruptcy
Bankruptcy is an insolvency process aimed at individuals who are unable to pay their debts or if they have a failed Individual Voluntary Arrangement (“IVA”). The main aims of bankruptcy are to grant an individual relief from their debts and to facilitate a fair realisation and distribution of their unsecured assets to those that they owe money.
To be made bankrupt you must owe a company or individual at least £5,000. This is called the bankruptcy threshold. Once a bankruptcy order has been made against an individual by the court a Trustee in Bankruptcy (“TiB”) will be appointed. A TiB has various duties which are set out in the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016. These enable them to collect in an individual’s assets and make distributions to their creditors.
An individual is automatically discharged from bankruptcy on the first anniversary of the commencement of bankruptcy (unless their discharge is suspended). An individual’s discharge from bankruptcy does not end the process of asset realisation and distribution. The TiB will remain in office for the purpose of finalising the realisation of the assets within the bankruptcy estate.
Edwin Coe’s dedicated team of personal insolvency experts are ranked in Chambers Band 1 for personal insolvency and are experienced in all aspects of presenting and defending bankruptcy petitions. We frequently act for creditors looking to enforce their debts against individuals or for debtors seeking advice in relation to potential bankruptcy.
Services we offer in this area include:
- Acting for creditors presenting bankruptcy petitions and all aspects of debt recovery assistance;
- Dealing with the formalities necessary to obtain a bankruptcy order at the hearing of a bankruptcy petition;
- Acting for debtors defending bankruptcy petitions on the grounds that the debt is disputed and any other grounds that may be relevant;
- Advising on all other personal insolvency options such as Statutory Demands and/or IVAs.
Should you require any assistance in either presenting or defending a bankruptcy petition or to discuss any alternative options to manage personal debt or recover sums owing from an individual, call our team today for an informal and no obligation discussion.
- Acting for an individuals in the course of bankruptcy proceedings that had been issued against them, to include responding to Statutory Demands, arranging attendance at bankruptcy petition hearings, negotiating with creditors in order to achieve settlements and advising about the impact of bankruptcy on assets located inside and outside the jurisdiction.
- Acting for trustees in bankruptcy in cases involving non-compliant bankrupts, the disputed ownership of assets, alleged third party interests in assets and antecedent transactions.
- Acting for a trustee in bankruptcy in a case during which the bankrupt individual was found to have provided false evidence to the Court: Ravikanth Borra (also known as Ravi Gupta) v The Commissioners for HM Revenue and Customs [2022] EWHC 1195 (Ch).
- Acting for the Trustee in the bankruptcy of three debtors who together operated an illegal pyramid scheme called Planline. The matter involved undertaking detailed examinations of numerous antecedent transactions to place assets out of reach of creditors, pursuing investigations to recover assets in Italy, the Baltics and Switzerland and working closely with the Financial Services Authority (FSA – now the FCA) and Serious Fraud Office (SFO).
Personal Insolvency
Corporate Insolvency
- Administration
- Individual Voluntary Arrangements
- Company Voluntary Arrangements
- Members Voluntary Liquidation
- Creditors Voluntary Liquidation
- Statutory Demands
- Winding Up Petitions: Guidance for Creditors
- Winding Up Petitions: Rescinding an Order
- Winding Up Petitions: Defending an Order
- Compulsory Liquidation
- Restructuring Plans
Claims against Directors
- Fraudulent Trading
- Wrongful Trading
- Preferences
- Transactions at an Undervalue
- Directors’ Disqualification
- Overdrawn Directors’ Loan Accounts
- Misfeasance
Other Contentious Insolvency Work
Key Information
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Grounds for seeking a bankruptcy petition
A bankruptcy petition can be presented by a company or individual (the creditor) who is owed more than £5,000 by an individual (a debtor). A petition can be presented when a debtor is unable to pay their debt to the creditor. The debt must be undisputed and for an unsecured, liquidated sum, in other words, the creditor must not have security over the debt and the debt must be for a specific amount of money which is due immediately or at a certain time in the future.
A petition can also be presented by a debtor’s IVA supervisor or anyone else bound by the terms of an IVA under the Insolvency Act 1986.
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Search for existing bankruptcy proceedings
Before presenting a petition, a creditor must check the bankruptcy and insolvency register to ensure that there are not existing proceedings against the debtor already underway. These searches can be undertaken online using the Insolvency Service website and at the Land Charges Department at the Land Registry.
If bankruptcy petition proceedings are underway then a creditor has the opportunity to appear at the petition hearing and support the petition or take over carriage of the petition.
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Contents of a bankruptcy petition
The petition must contain certain important pieces of information such as the identification of the debtor and details about how the petition debt has been incurred.
If the petition is preceded by a statutory demand the petition must also specify the date and manner of service of the statutory demand, confirmation that the statutory demand has neither been complied with nor set aside and that no application to set aside the statutory demand is outstanding.
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What happens after a bankruptcy petition has been issued?
Once a creditor has presented their petition at court, paid the court fee and deposit, the court will issue the petition and list it for a hearing.
Depending on which court the petition is allocated to, the first hearing of a bankruptcy petition is likely to be around 4 weeks after it was issued. Petitions can be allocated to the High Court (for debts over £50,000), the Central London County Court (for debts under £50,000) or another hearing centre outside London if the debtor is resident or does business there.
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What happens after a bankruptcy petition has been served?
First, as a debtor, you should check that you have been given enough notice before the bankruptcy petition hearing (this should be 14 days).
Secondly, check the contents of the bankruptcy petition; are the details of the debt correct? Does the petition reference a statutory demand? Have you made an application to set aside the statutory demand which is currently underway? Do you want to oppose the making of a bankruptcy order? One of our team will be able to assist any debtor at this stage to advise them about their options.
Alternatively, if the debtor is able to pay the petitioning debt or part of the petition debt or wish to negotiate payments terms and/or an adjournment for time to pay, again, they should contact one of our team for advice.
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Grounds for opposing a bankruptcy petition
It is possible to oppose the making of a bankruptcy order if the debt is substantially disputed or if there are other issues such as the debtor not being properly served with a statutory demand. In order to oppose a petition, the debtor will need to file and serve a notice and evidence setting out their position. This must be done 5 clear days before the hearing which has been listed.
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Who attends a bankruptcy petition hearing?
Aside from the presiding judge, a debtor can either instruct Counsel (via their solicitors) to attend the hearing on their behalf or they may attend in person.
Once a petition is presented, it is considered a “class action” this means that a group of people who have been adversely affected can take action against the debtor collectively. In the case of bankruptcy proceedings this group is all unsecured creditors of the debtor. This means that any unsecured creditor owed money by the debtor can attend the petition hearing and support the petitioning creditor.
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What may happen at a bankruptcy petition hearing?
At the hearing the Court may:
- Dismiss the petition – which would end proceedings;
- Grant the bankruptcy order – which would make the debtor bankrupt;
- Adjourn the hearing to give the debtor time to pay or seek legal advice;
- Adjourn the hearing either with directions for the parties to file further evidence or for a further hearing to decide directions; or
- Make such other order as the Court thinks fit.
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What happens after someone is made bankrupt?
Either the Official Receiver (“OR”) or a licensed Insolvency Practitioner (“IP”) can be appointed as a trustee in bankruptcy (“TiB”) of an individual’s estate once they have been made bankrupt. Once appointed the TiB has a statutory duty to identify, get in and realise the bankrupt’s estate so that distributions can be made to creditors. The TiB’s duties are set out in the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016.
It is usual for the OR to initially be appointed as TiB upon the making of a bankruptcy order. The TiB may subsequently apply to the court for directions on administering the bankrupt’s estate and may appoint and IP to take over as TiB.
Once a TiB is appointed they will work with the bankrupt to find out information about the bankrupt’s finances, to include assets, liabilities and income. A bankrupt should comply with their TiB’s requests for information so that their estate can be effectively dealt with.
Contact our Restructuring & Insolvency Team
telephone: 020 7691 4000
or email: enquiries@edwincoe.com