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LPC - BLP MODULE - PERSONAL INSOLVENCY NOTES (DISTINCTION)
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Notes on personal insolvency
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BLP – PERSONAL INSOLVENCYThe Bankruptcy process.
1. Creditors Petition
- A creditor may present a petition to the court (section 264) if the debtor owes
him £5000 or more. This sum must be unsecured.
- The creditor must also be able to claim the debtor is unable to pay the debt or
has little prospect of being able to pay it. Presumed if method detailed in section
268 is used.
- Creditors owed less than five thousand can not petition independently but they
can join together provided that the amount when combined is not less than
£5000.
- Petition should be presented to the debtors local county court hearing centre.
- Creditor must pay a substantial deposit to cover the costs of the trustee in
bankruptcy and also a fee to the court.
- The creditor must also arrange for the petition to be served personally on the
debtor although if the debtor is elusive the creditor may ask the court for
permission to serve another way.
2. Court hearing
3. Official receiver appointed and automatically becomes the trustee in bankruptcy.
4. Bankrupts property vests in trustee.
5. Statement of affairs submitted to official receiver.
6. Creditors may be able to appoint a trustee in bankruptcy to replace the official
receiver.
7. Trustee collects assets and investigates past conduct.
8. Trustee distributes assets
- once the trustee has taken control of the bankrupts assets and finalised
investigations and proceedings to set aside antecedent transactions the assets
must be converted into money and distributed to the creditors.
- Secured creditors can sell the assets themselves, pay any debt and pass the
surplus to the trustee. If the asset does not produce sufficient funs the secured
creditor will have to claim the balance as an unsecured creditor along with
everyone else.
- Section 328 determines the distribution order:
o The cost of bankruptcy – professional charges of trustee
o Preferential debts.
o Ordinary unsecured creditors
o Postponed creditors.
9. Bankrupt discharged
10. A BRO or BRU may remain in place for up to 15 years.
The Role of the official receiver.
When a bankruptcy order Is made by the court or the adjudicator the official
receiver initially takes control of the debtors property. He or his department will:
o Ask the debtor for a statement of affairs and investigate if necessary
o Take steps to protect property
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