ankruptcy or the threat of bankruptcy (via a Statutory Demand or Bankruptcy Petition) is a worrying time for most people. Will I lose my home? Will my debts be wiped out? How long will it last? Will it affect my family? Can the bankruptcy be cancelled or ended early? What are my obligations and duties? Will I be affected by my partner’s bankruptcy? These are all very valid questions.
Isadore Goldman are specialists with a very long pedigree of providing personal insolvency advice. If you or a family member are a bankrupt, or about to be made bankrupt, and need advice on the duties and restrictions relating to bankruptcy, alternatives to bankruptcy, advice to your partner or whether you can cancel your bankruptcy (an 'annulment application'), speak to us as soon as possible.
Bankruptcy is a process that is intended to achieve two purposes. Firstly, it provides a fresh start for the honest but unfortunate debtor. Secondly, it provides for all creditors (the people owed money) to be repaid equally from whatever funds are available. To help with this process, when a person is made bankrupt he or she will have to hand over all their non-essential assets to an individual who is appointed to manage the bankruptcy. This person is called the ‘Trustee in Bankruptcy’ (the Trustee) and it is their job to sell the assets and pay the creditors. If a bankrupt co-operates with their trustee they will normally be freed from their bankruptcy restrictions after a year.
The typical parties within a bankruptcy scenario are the potential bankrupt, his or her partner, the creditors and the Trustee. We regularly act for all these parties and our experience means we have an intimate understanding of the concerns and strategies that apply to each. Whether you are bankrupt or a bankrupt’s spouse or partner, we are ideally placed to fight your corner.
If you cannot pay your debts as they fall due, you can make an application for your own bankruptcy. This application is made to an office known as the Adjudicator and not to the Court. We have experience dealing with the process, and can help navigate the issues that might arise on such an application.
A Bankrupt’s duties
If you have recently been made bankrupt, you may be wondering what you can and cannot do, and how this may affect what you do on a day to day basis. You may also be unaware of what duties you owe to your Trustee in Bankruptcy. It is important to secure advice at an early stage so as to avoid some of the harsh consequences that can follow from non-cooperation.
Subject to your full cooperation with your Trustee, you will usually receive your discharge from bankruptcy after one year. Prior to then, you will be subject to a number of restrictions. One of these is that you cannot borrow more than £500 without telling the lender that you are bankrupt. This is a double edged sword because if you do tell the lender then they may be reluctant to lend any money to you at all. A further important restriction is that you cannot be involved with the management of a company whilst you are an undischarged bankrupt. This means that you cannot act as a director of a company, create, manage or promote a company without the court’s permission or indeed manage a business with a different name without telling people you do business with that you are bankrupt. If you are unsure about any of these restrictions and how they may apply to you, please contact us. Criminal and financial consequences can follow both for you as a bankrupt and anyone who assists you in breaking the above rules. For example, if you act as a director of a company whilst you are an undischarged bankrupt and somebody assists you with that, that person who is assisting you can be made liable for all the debts of that company.
The above restrictions will usually last for one year, i.e. until your bankruptcy is discharged. However, if you fail to cooperate with your Trustee (more on this below) then the Trustee or the Official Receiver can apply for a Bankruptcy Restrictions Order which extends the above restrictions for a specified period. Alternatively, the Court can suspend your discharge from bankruptcy.
For this reason, it is important that you are aware of what duties and responsibilities you owe to your Trustee, in particular with regard to the provision of information to assist them in managing your bankruptcy estate. If you are unaware of these duties, your Trustee or the Official Receiver may interpret this as wilful non-compliance which can lead to costs penalties, further restrictions and sometimes criminal liability.
If you are unsure about your position, contact us for an initial consultation. Whilst your interest and your protection will always be our top priority, it may be the case that your money is best spent, at least initially, on advice to your partner or associate. Whoever we advise, you can be assured that we will protect your interests and guide you through the bankruptcy process.
Alternatives to Bankruptcy
If you are already bankrupt or facing the threat of bankruptcy, there may be other options available. For example, you may be eligible for a debt relief order (DRO) or an individual voluntary arrangement (IVA). It may even be the case that you have a complete defence to the debt that is claimed from you. We regularly advise individuals facing financial difficulties and can recommend the best option available according to your circumstances.
A DRO is a simplified, quicker and cheaper alternative to bankruptcy suitable for debtors owing £20,000 or less and with few or no assets and little disposable income. This limit is currently under review.
An IVA is a formal agreement reached with your creditors that is monitored by a third party called a Supervisor, who is usually a lawyer or an accountant. Such agreement can give you considerably more flexibility in the terms you can negotiate with your creditors for dealing with their claim than is available in a bankruptcy. We have considerable experience advising on and providing such agreements and will always strive to find the best and most cost-effective solution to your circumstances. We also advise on the situations that sometimes arise where you have been unable to comply with the terms of that agreement or are at odds with your Supervisor. Further details regarding IVAs are available here.
From 4 May 2021, a new Debt Respite Scheme comes into force which can afford you 60 days protection from any action against you by creditors. You will need to engage a debt advisor to assist with this, and we can help guide you through the process.
Finally, you can seek informal agreement with creditors, and we can advise and assist on negotiations with a view to avoiding bankruptcy or a formal insolvency process altogether.
The ultimate decision is yours but after speaking to one of our team, you will be able to make an informed choice.
Partners or Spouses
Often the partner or spouse of a bankrupt is the innocent victim in what follows. They may even be unaware that a bankruptcy order has been made but nevertheless get drawn into a world where all the cards seem to be held by their partner’s Trustee in Bankruptcy. All that they hold dear, including their home, can appear to be at risk. Specialist advice is essential, and the earlier that is sought the better. We can advise you on entitlements and obligations and help steer a course through the choppy waters of a partner’s bankruptcy and achieve the right result in negotiations with the Trustee.
Whilst early action is always a good investment, all is not lost if you seek advice late. Whatever the stage of the proceedings, we will strive to protect your assets and interests.
If you are already bankrupt and believe, for whatever reason, that the bankruptcy order should not have been made, or if you or a family member or friend has sufficient funds to pay off your debts in full, there are options available to cancel (annul) your bankruptcy by an application to court. We have streamlined methods of dealing with these applications and will be able to offer you highly competitive rates.
If you believe the bankruptcy order should never have been made, this is essentially a dispute between you and the petitioning creditor, i.e. the person who caused your bankruptcy. We can advise you on the merits of your case and the best strategy to adopt. This can be a complex process, so it is best to seek advice as soon as possible after the bankruptcy order has been made. There are also additional options that we can discuss with you.
If you or a third party is able to pay off your debts in full, you will need to act quickly to provide a report to the court and there are time-limits to be complied with. The earlier such an application is made, usually the more straightforward it is.
The information contained within this website is for information only and should not be construed as an accurate summary of the law or legal advice on any matter.
Wishing you a very Merry Christmas and a Happy and Healthy 2022 from the team at Isadore Goldman. #christmas… https://t.co/KpWFaUv2yG22nd Dec 2021 13:31:15
In our latest Technical Insolvency Bulletin, we look at the new provisions which form part of The Finance Act 2020… https://t.co/fKnMhe8Ud91st Nov 2021 08:24:54