Process of Bankruptcy

There is a bankruptcy court for each judicial district in the country.

The Insolvency Rules 1986 (“the Rules”) govern the procedural aspects of the process.

The procedure begins with the filing of a Petition and a cheque in the sum of £450.00 (this comprises £150 Court Issue Fee and £300 for the Official Receiver’s Deposit.

Please note that the deposit is refundable if no Bankruptcy Order is made although the Court Issue Fee not) with the Bankruptcy Court in your area. The filing of the Petition will not stop your creditors from suing, grabbing your wages, emptying your bank account or telephoning. A date will automatically be set for the Hearing of the Bankruptcy Petition. Unless the debtor can come to an arrangement with the petitioning creditor or provide adequate reason why the Court should either dismiss or adjourn the matter further, the Court is under a duty to make a Bankruptcy Order.

The Official Receiver (“OR”) is appointed to look after your affairs. He will make an appointment with you more or less immediately which you must attend. The Official Receiver has powers to force a Bankrupt to attend such a meeting. At that meeting the OR will discuss with the debtor the underlying reasons for the bankruptcy and will make an assessment of the debtors, assets and liabilities.

If there are no assets in the bankruptcy i.e. the debtor has no assets, then it is unlikely a Trustee will be appointed. In all other cases, a Trustee in bankruptcy (“the Trustee”) will be appointed.

The Trustee sells (“liquidates”) the property that can be taken from you and splits the proceeds among your creditors. The effect of this is that you no longer legally owe your creditors and they are forbidden from trying to collect any unpaid percentage.

Business Bankruptcy

ALTERNATIVES TO BANKRUPTCY

Though many people petition for bankruptcy to deal with their debts, just as many shy away from bankruptcy and consider other solutions to straightening out their debt problem.

There are a number of different strategies for handling debt. For starters, contact your creditor(s), ask for their cooperation, and try to work out different payment arrangements or options. For example, if you are snowed by credit card debt, get in touch with the company, explain the situation, and ask to temporarily reduce your minimum monthly payments, waive late charges, and extend the payment period – with smaller payments at “no” interest.

A second recommendation is to turn to the Citizens Advice Bureau, a nationwide non-profit organisation that will work with you and your creditors to devise a more manageable repayment plan suited to your finances.

A third might be to sell any of your assets that have a resale value and apply the proceeds to your debt. Any balance due can be negotiated with the creditor.

Of course, the solution may be to enter into an Individual Voluntary Arrangement (“IVA”). This is a process very similar in terms to the CVA outlined above. This is a procedure sanctioned by the Courts whereby an IP is appointed to supervise an arrangement with your creditors. This arrangement could be one which could last for anything up to five years. It may make provision such that only a percentage of the debt is eventually paid or that the debt is repaid albeit over a much longer period. The IVA procedure is discussed in more detail below.

Finally, another solution is to consolidate all outstanding debts into a single loan (often through credit card balance transfers and home equity loans). This approach relieves you of being saddled with debt from multiple creditors, since you will be making payments only to one lender.

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About Tax Deduction

Perhaps. Contact your accountant or the Internal Revenue ("the IR") for information about how to report worthless securities as a loss on your income tax return. If you don't know whether your shares have value, and you can't find a share price in the newspaper, ask your broker or the company for information.

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About Tax Deduction

Perhaps. Contact your accountant or the Internal Revenue ("the IR") for information about how to report worthless securities as a loss on your income tax return. If you don't know whether your shares have value, and you can't find a share price in the newspaper, ask your broker or the company for information.

Some Insolvency Terms......You must know !

Administration order

An order made in a county court to arrange and administer the payment of debts by an individual; or an order made by a court in respect of a company that appoints an administrator to take control of the company. A company can also be put into administration if a floating charge holder, or the directors or the company itself file the requisite notice at court.

Administrative receiver

An IP appointed by the holder of a debenture that is secured by a floating charge that covers the whole or substantially the whole of the company's assets. The IP's task is to realise those assets on behalf of the debenture holder.

Bankruptcy restrictions order or undertaking

A procedure will be introduced on 1 April 2004 whereby a bankrupt who has been dishonest or in some other way to blame for their bankruptcy may have a court order made against them or give an undertaking to the Secretary of State which will mean that bankruptcy restrictions continue to apply after discharge for a period of between two to fifteen years.

Charge

Security interest taken over property by a creditor to protect against non-payment of a debt (such as a mortgage).

Disqualification

A procedure whereby a person has a court order made against them or gives an undertaking to the Secretary of State which makes it an offence for that person to be involved in the management or directorship of a company for the period specified in the order (unless leave has been granted by the court).

Dividend

Any sum distributed to unsecured creditors in an insolvency.

Fixed charge

A charge held over specific assets. The debtor cannot sell the assets without the consent of the secured creditor or repaying the amount secured by the charge.


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What is DIRECTORS DISQUALIFICATION ?

Pursuant to the provisions of the Company Directors Disqualification Act 1986 (“CDDA”) the Courts have the power to disqualify individuals from inter alia acting as a director of a limited company. Such a disqualification order will also prevent that individual from being involved in the management, promotion or formation of that company. The disqualification order made also covers a number of other activities.

One of the main reasons that an individual may have for creating a limited company is that that company trades with the benefit of limited liability. What this means is that should the company become insolvent then only the assets of the limited company will be used to liquidate the liabilities in so far that they can, of that limited company.

An individual trading either as a sole trader or in his capacity as a member of a partnership places all of his or her assets in jeopardy. The sole trader and partnership assets, the personal assets of the individual may also be used to liquidate the debts incurred by an individual or partnership as a result of its trading activities.

Limited liability is therefore on one view an insurance policy in relation to the individual’s personal assets.


Read more on Director Disqualification issues.

PROCEDURE FOR DISQUALIFICATION

Upon receiving notice of impending action from the DTI, the individual will shortly thereafter be served with substantial documentation which will be the commencement of proceedings on behalf of the DTI.

Typically the Claim Form (which will be the Court document setting out what the DTI is complaining of and what they are asking the Court to do) accompanied by perhaps one or two Affidavits of Civil Servants setting out minor details of the matter together with what is usually a very substantial Affidavit from the liquidator of the company in question which contains the detail of the reasons for disqualification will be served upon the defendants.

a) to fight the proceedings b) to admit the offence c) to do nothing (in which case a disqualification order and a costs order will in all likelihood be made against the defendant/s.

The Defendant could decide to strongly defend proceedings. This will of course require funding. Those funds can either come from private funds of the Defendant or from Legal Aid if it is available.

Alternatively, the Defendant may wish to admit all or some of the allegations and to negotiate with the DTI with a view to compromising proceedings. This procedure is usually known as the “Carecraft” procedure.

In any event if an individual receives notice of disqualification proceedings, he should urgently seek legal advice.

There are numerous ramifications of a disqualification order. Firstly, the individual will be disqualified from acting in the promotion, formation, management or directing the affairs of a limited company. For most company directors this would effectively remove the ability of that individual to generate income. This could therefore be catastrophic to that individual’s financial circumstances.

Secondly, as set out above, a substantial costs order would ordinarily be made in favour of the DTI. Please be aware that these proceedings are extremely expensive to bring on behalf of the DTI and also to defend. It is therefore likely that an extremely substantial costs order will be made against the defendant/s.

The length of disqualification can be for a period of up to fifteen years.

Read more on Director Disqualification

AVOIDING A FINANCE CHARGE

Many credit cards enable you to pay the entire outstanding credit amount within a certain time period without incurring any finance charge. By paying off your credit balance within the grace period, you receive what amounts to an interest-free loan. The creditor still makes money by charging the seller (such as a department store or other retailer) a fee to process their credit card transactions, so the lenders collect from the retailer an amount that covers their costs of these short term loans.


Other Credit Problems.

FIXED AND A VARIABLE RATE...........?

A fixed interest rate means that the rate of the finance charge does not change throughout the duration of the extension of credit. For example, a car dealer may offer a loan for a car at 4.9%APR for 24 months; this means the APR is fixed at 4.9% for the duration of the loan (which is an instalment closed-end credit loan).

Under a variable rate loan, the finance charge is determined by an index, such as the “base rate” published nationally for loans charged by banks. This enables the lender to charge an interest rate that reflects current market conditions. Many credit card issuers charge a base interest rate plus an indexed rate to assure them adequate return on the loans that they extend.

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What is CREDIT ?

Credit is money granted by a creditor or lender to a debtor or borrower, who defers payment of the debt. In exchange for the credit, the lender gets back the money, usually paid on a monthly basis, plus interest. The debtor gets the use of the money to pay for and take possession of things today and the creditor gets back more money that s/he loaned out. Modern society is dependent upon credit to generate sales; it enables people to have the things they want and need, but can’t afford to pay for right away.


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FREE Bankruptcy Advice for UK

UK Advice is solely dedicated on helping financially distressed & under performing small businesses and it's FREE. Our services include Business Bankruptcy, Bankruptcy Law, Collections, Consumer Bankruptcy, Credit Problems, Director Disqualifications, Criminal Prosecution. Our Panel of Advisors include Insolvency Practitioners, Merchant Bankers, Commercial Solicitors, Venture Capitalists, Commercial Valuers and Business Angels, with backgrounds from the industry and the turnaround profession. As well as associates from the government and academic, all of whom share a common interest in revitalizing troubled businesses.
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