WHAT IS INVOLVED IN BRINGING BANKRUPTCY PROCEEDINGS AGAINST A DEBTOR
If you are a creditor who is owed more than £750 you can serve a 'statutory demand' for the money due to you and if it is not paid or secured (for example, by a guarantee to provide something else of the same value); or a settlement is not agreed, within 21 days, and the debtor has not applied for the statutory demand to be set aside, then you can apply to make your creditor bankrupt. Below I have set out the procedure that will need to be complied with if you decide to apply to make your creditor bankrupt.
The completed Statutory Demand must usually be served on your debtor in person. As you will need a certificate of service it is usual to either employ a process server to carry out this function (an individual) or serve the document yourself. The court is not involved in the issuing of statutory demands, so no court fee is payable.
If you do not receive a response to the Statutory Demand your next step is to issue a Bankruptcy Petition. This will need to be issued in the High Court in London, or in a County Court that deals with bankruptcy matters. Generally, the petition for bankruptcy should be issued in a court that deals with the area where your debtor has lived or traded for the longest period in the previous 6 months. If your debtor lives in one court district and runs a business in another, it will be necessary for you to issue the Petition at a Court dealing with the district where your debtor’s business is, as this takes priority over their home address.
To prepare the Bankruptcy Petition, you will need to complete a statement of truth verifying the matters given rise to in the Petition and prepare a statement of truth verifying that the statutory demand has been served on the debtor.
Once the Petition is prepared it will need to be filed at Court with three copies one to be served on the debtor, one to be attached to the statement of truth verifying the matters that led to the petition; and one to be filed at Court.
A deposit and court fee is payable on when submitting the documentation to the Court. You will need to pay the Petition deposit of which is £600 towards the costs of administration of the bankruptcy (an Insolvency Practioner will be appointed to deal with the bankruptcy in the event that your Debtor is made Bankrupt) and a further fee of £220 will be payable to the Court.
Once the Petition has been issued the court will then fix the place and date when the petition will be heard. Normally there must be at least 14 calendar days between the petition being served on your debtor and the Bankruptcy hearing. A copy of the petition must have been served on your debtor in person. If this is not possible the court can, on application by you, order that the petition be served on your debtor by alternative means, such as by post. This is known as 'substituted service.
If your debtor wishes to oppose the petition, they must give the court a statement of truth at least 5 business days before the hearing. On the day of the hearing, you must provide a list of people intending to appear at the hearing for the court. At the hearing, you and your debtor and any supervisor of any voluntary arrangement all have the right to be heard. The court can then:
· stay (delay or stop) the proceedings;
· dismiss the petition;
· adjourn (postpone) the hearing; or
· make a bankruptcy order.
After making a bankruptcy order, the court usually appoints the official receiver (a civil servant in The Insolvency Service and an officer of the court) to manage the bankrupt person's affairs. The official receiver has responsibility from the date of the bankruptcy for administering the bankruptcy and protecting the bankrupt person's assets. The official receiver will also act as trustee of the bankruptcy estate unless an insolvency practitioner is appointed. If this happens, the official receiver still has a duty to investigate the bankrupt person's affairs. Two people may be involved in the bankruptcy, the Trustee, who is responsible for selling the bankrupt person's assets and distributing the money among the creditors; and the official receiver, who has a duty to investigate the bankrupt person's affairs.
If a person is declared bankrupt the court can 'annul' (cancel) a bankruptcy order on an application of the person who has been declared bankrupt if:-
· the court did not have all the relevant facts when making the bankruptcy order and would not have made an order had it known those facts; or
· the bankrupt can pay all the debts in full; or
· the bankrupt enters into a voluntary arrangement with the creditors.
An application to annul the bankruptcy order can be made at any time (even after the bankrupt has been discharged).
A bankrupt can apply for the cancellation of a bankruptcy order, if there has been a change in circumstances since the bankruptcy order was made. A cancellation will usually only be granted in exceptional circumstances and would normally require the consent of you as the Petitioning creditor. A bankrupt can also 'appeal' against a bankruptcy order on a point of law. As a result of an appeal, the court can cancel the bankruptcy order or otherwise change its decision. A bankrupt has four weeks in which to appeal the order being made.
Bankruptcy proceedings can be 'stayed' (stopped) however the bankruptcy proceedings are usually only stayed:
· while waiting for an application for an annulment,
· an appeal or a rescission of the bankruptcy order,
· or while an individual voluntary arrangement is being proposed.
If you are thinking of bringing bankruptcy proceedings against someone who owes you money and you need some help please do not hesitate to contact us on 0203 005 3284