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LPC-BLP - PERSONAL INSOLVENCY (DISTINCTION)
- Module
- LPC
- Institution
- Swansea Metropolitan (UWTSD)
Notes on personal insolvency
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BLP – Personal Insolvency.Only individuals can be made bankrupt. Companies go through other processes when they
become insolvent.
Solvency is important because many business fail/face financial problems.
Bankruptcy is the most extreme options. The Individual voluntary arrangement is less
extreme.
In the earlier stages the repayment stages are likely to have been renegotiated.
If a sole traders business has failed they are personally liable – they may become insolvent.
Punishments are harsher for those who become recklessly bankrupt. Those who have just
fell on hard times are not penalized as severely.
The rules details how insolvency plays out in practice.
To be insolvent (has specific legal definition) – to be legally insolvent you must have debt
that are payable immediately and you do not have the money to pay them or debts that are
payable in the future but you have no reasonable prospect of being able to pay them. It is
not being able to meet your financial obligations as they fall due.
If either of these two situations exist then a person is considered insolvent.
A creditor will petition the court for a particular person to be made bankrupt – if accepted
an order will be made
An official receiver is a specialist in solvency proceedings. They look at the persons financial
situation is. The creditors may appoint their own trustees in bankruptcy – their job is to
investigate why the person is in such a financial state and to collect assets any potential
payment methods to discharge the debt.
Reckless bankrupts may be served with bankruptcy restriction orders
In practice proof of inability to pay is usually done by proving that they have served a
statutory notice and the debtor still didn’t pay. Judgment debt in their favor and it remains
unpaid
If a debtor is applying for the bankruptcy process to be started they apply to an adjudicator.
Fee is approx. £680 to apply.
Creditors application is usually approved automatically – judges have little discretion if all
the demands are met.
TiB takes control of the bankrupts entire estate. Beneficial estate remains with the
bankrupt. Bankrupt remains in ownership of their tools of trade and clothing, and essential
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