12 - BL - Insolvency Individ Flashcards
What are the two personal insolvency procedures?
(1) Individual Voluntary Arrangements (βIVAsβ);
(2) bankruptcy
What is the process of obtaining an IVA?
The debtor drafts proposals setting out a statement of their affairs (eg full details of assets and liabilities).
The nominee (insolvency practitioner) submits a report to the court.
What percentage of Creditors need to approve an IVA?
Creditors holding at least 75% (by value) of the debt must vote to approve the terms of the IVA.
Must include at least 50% unconnected parties
How can a debtor get a moratorium for an IVA?
- Apply to the court for an interim order.
- If the court grants the order, it brings about a moratorium,
What does the moratorium for an IVA do?
Freezing existing or proposed bankruptcy and other proceedings and legal process (including execution, landlordβs right of peaceable re-entry and/or distress for rent) against the debtor, without leave (in any such case) of the court.
How long does a moratorium for an IVA last?
14 days which the court can extend.
Who is bound by an IVA?
The debtor and all of their unsecured creditors
Does not bind preferential & secured creditors unless they consent to the IVA
What happens if the debtor doesnβt keep up with the IVA?
The supervisor can usually petition for their bankruptcy.
How does a bankruptcy begin
a creditor presents a bankruptcy petition.
Who can a Bankruptcy petition be brought against?
An individual
- present or
- domiciled
in the UK
Bankruptcy - how is the debtorβs inability to pay evidenced?
- a statutory demand for Β£5,000 that has neither been satisfied within 21 days from service of that demand, nor set aside by the court; or
- a judgment debt that has been returned unsatisfied
Court has discretion to make a bankruptcy order.
Bankruptcy - What restrictions are placed on the debtor?
- deprived of ownership of their property except for their reasonable domestic needs. π‘
- obtaining credit of over Β£500 without disclosing the bankruptcy, π·
- acting as a director or being involved in the management of a company, π©
- practising in certain professions. π¨βπΌ
- giving gifts π
Who manages the Bankruptsβ assets?
The bankruptβs estate vests in the Trustee in Bankruptcy immediately upon appointment of trustee or Official Receiver
What is the order of creditors in a personal bankruptcy?
- secured creditors (but limited to the value of the security itself and ranking with ordinary unsecured creditors for any excess amount owing); π‘βοΈ
- expenses of the bankruptcy; π€
- specially preferred creditors (training/apprenticeship fees);π¨βπ«
- preferential creditors (similar to those on corporate winding up); π§βπ³π¬π§
- ordinary unsecured creditors; π
- statutory interest; π¦
- debts of a spouse (must be provable but they are postponed to other creditors); and finally, π°
- any surplus is payable to the bankrupt. π₯³
What are the duties of a Bankrupt in respect of the Trustee or Official Receiver?
(a) give information;
(b) attend on the trustee
(c) do all such other things, as the trustee may for the purposes of carrying out his functions reasonably require.β