Presenting a Creditor's Bankruptcy Petition

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If you are a creditor who is owed money by an individual, presenting a bankruptcy petition is one option available to you to try and recover the debt owing. 

Filing a bankruptcy petition is only appropriate where several conditions have been met, which are explained by our Insolvency solicitors below. 

Prior to presenting a bankruptcy petition, a statutory demand has to be served on the debtor. 

A statutory demand is a formal way of asking for a debt to be repaid and provides the debtor with either 21 days to pay the debt or 18 days to make an application to the court to have the statutory demand set aside. 

An application to set aside a statutory demand can be made if either the debt is disputed on substantial grounds or the debtor has a counterclaim or set-off that would reduce the debt to less than the bankruptcy level of £5,000.   

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Conditions for presenting a creditor's bankruptcy petition

A bankruptcy petition can only be issued against an individual debtor if the following conditions are satisfied:

  1. The debt owed must exceed £5,000.
  2. The debt must be for an unsecured liquidated sum (i.e. a specific amount which has been fully and finally ascertained) payable to the creditor either immediately or at some certain future time. 
  3. The debtor is either unable to pay the debt or has no reasonable prospect of being able to pay it. 
  4. There is no outstanding application by the debtor to set aside the statutory demand. 

Normally, at least 3 weeks must have passed from the date the statutory demand was served before the bankruptcy petition is presented unless there is a serious possibility that the debtor's property, or its value, will be significantly diminished during those 3 weeks. 

However, even on an expedited petition, the court must not make a bankruptcy order until that 3 week period has lapsed. 

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The Procedure

The bankruptcy petition will be issued in the local court of the debtor.  As at the time of the publication of this blog, the court fee payable to present a bankruptcy petition is £332, and a deposit of £1,500 must be paid to cover the initial costs of the Official Receiver who will be appointed as Trustee in Bankruptcy if a bankruptcy order is made. 

If a bankruptcy order is not made, the £1,500 deposit (less a £50 administrative charge) will be refunded.   

The court will seal the bankruptcy petition and set a first hearing date for the petition to be heard. 

Once the bankruptcy petition is sealed by the court, the bankruptcy petition must be personally served on the debtor unless the court allows service of the bankruptcy petition by an alternative method where appropriate. 

Please note, if there are other creditors owed money by the debtor then those creditors also have the right to attend the hearing in order to either support or oppose the bankruptcy petition. 

Before the hearing, it is also necessary to confirm to the court that the debt is still due and owing and has not been paid or secured. 

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The Procedure

The first hearing of the bankruptcy petition

At the hearing of the petition, the court may do any of the following:

  • Make a bankruptcy order.  The court will make a bankruptcy order if it is satisfied that (1) either the debt has not been paid, secured or compounded for or (2) the debtor has no reasonable prospect of being able to pay the debt when it falls due. 
  • Dismiss the bankruptcy petition.  The court may dismiss the bankruptcy petition if it is satisfied that (1) the debtor can pay all their debts or is satisfied that the debtor has made an offer to secure or compound the debt, (2) the acceptance of that offer requires the dismissal of the bankruptcy petition or (3) the offer to secure or compound the debt has been unreasonably refused.
  • Stay the bankruptcy petition.  This is most likely to happen if there is credible evidence of a reasonable prospect of the debtor being able to pay the debt within a reasonable time. 
  • Adjourn the hearing.  Whilst a debtor who intends to oppose the making of a bankruptcy order must file notice with the court and serve it on the petitioning creditor not less than 5 business days before the hearing, it is regularly the case that the debtor will not comply with this court deadline and may actually only oppose the making of a bankruptcy order at the hearing itself. 

If this happens, it is likely the court will adjourn the first hearing following any indication of the debtor's opposition to bankruptcy unless it may be immediately dismissed as invalid, fanciful, arbitrary or abusive. 

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The first hearing of the bankruptcy petition

What happens if a bankruptcy order is made

If a bankruptcy order is made, the Official Receiver will be appointed as Trustee in Bankruptcy by the court. 

The Official Receiver will carry out investigations and gather information regarding the debtor's assets and liabilities which constitute part of the bankruptcy estate.

The Official Receiver will also determine who the creditors are and when and how they will be paid. This will be based on whether the creditor has a security over any of the assets or is a preferential creditor. 

If you are an unsecured creditor and there are insufficient funds to pay all unsecured creditors in full, you will receive a pro-rata payment in accordance with the size of your debt and the amount owed to other unsecured creditors.

It is important to note that making a debtor bankrupt does not mean your debt will be paid ahead of sums owed to other creditors (particularly secured creditors). 

Unfortunately, it is often the case that there are insufficient funds to pay any sums to unsecured creditors.

It is sometimes the case that the Official Receiver is replaced as Trustee in Bankruptcy by an insolvency practitioner. 

Any insolvency practitioner who acts as Trustee in Bankruptcy has the same role as the Official Receiver.

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What happens if a bankruptcy order is made

Contact Our Insolvency & Restructuring Solicitors

Please do not hesitate to contact Myerson's experienced and knowledgeable Insolvency & Restructuring Team if you need assistance or advice relating to the presentation of a creditor's bankruptcy petition. You can get in touch with our Insolvency experts on: 

0161 820 1698