Bankruptcy Hearings Flashcards
What is the legislation for Bankruptcy Hearings?
Insolvency Act 1986 part 2
Insolvency Rules 2016
What is a secured creditor?
What is an unsecured creditor?
Creditor who has their debt secured against a particular asset owned by the Debtor (e.g Mortgage)
Creditors who do not hold any specific security in relation to their debt. Instead, they rely upon the general assets of the Debtor to be able to recover the debt.
SECURED CREDITORS:
What is the difference between fixed security and a floating security?
Fixed security is secured on an particular asset.
Floating is a charge that is secured generally against the debtor’s assets, without being exclusively attached to any individual asset. When chage is called in the charge attaches to a specific asset
UNSECURED CREDITORS:
What are 2 types?
Priority debts and non-priority debts
List of priority debts under …
Creditor owed a a debt of these types…
All funds are distributed evenly between…
Schedule 6 Insolvency Act 1986
…takes priority over other creditors
Debts of the same priority
How are costs occasioned with in bringing the bankruptcy or in administrating the bankrupt’s estate dealt with?
If Trustee incurred costs in selling or realising the security these costs have …
These costs are given absolute priority — these costs are recovered from available estate before any unsecured creditors’ debts
… priority over even secured creditors (under schedule 6)
If there are insufficient assets to satisfy all the Creditors in one individual class, then the available funds will be …
distributed evenly amongst those Creditors, regardless of debt size.
Discharge from bankruptcy occurs automatically at the end of the period of _______ after the order is made
One year
Unless court suspended running of that period
Upon discharge the bankrupt will be discharged ….
from liability for any debts that remain unsatisfied.
Discharge dose not affect the rights of who?
Any secured creditor to enforce security (s.281(2) IA ‘86)
What is a individual voluntary arrangement?
Formal repayment proposal presented to Debtor’s Creditors via an insolvency practitioner
Contractual arrangement between debtor and creditors
Who can obtain a bankruptcy order?
What must debtor also file?
Creditor or debtor can present a bankruptcy petition
Must file a statement of affairs
IF a creditor petitions for bankruptcy what must they show?
that the Debtor owes them at least £5,000 and that the Debtor is unable to pay the debt that is due and owing.
On what grounds can a petition be brought?
- Debtor has failed to comply with a statutory demand and time for compliance (21 days) or application to set aside (18 days) has expired
- Debt is payable under a judgment and other process issued to enforce but failed
- Individual voluntary arrangement made and debtor failed to comply
What must a statutory demand contain?
Details of the debt
And a statement that if the debtor does not comply with the demand bankruptcy proceedings may be commenced”
How many days must a creditor wait after sending a statutory demand to a Debtor before issuing a Petition at Court?
21 days (pursuant to s.268 IA 86)
How should a statutory demand be issued?
Personal service if practicable: creditor is under obligation to do all that is reasonable to bring demand to Debtor’s attention via personal service
If this been done but unable to effect personal service, can by done by substitute method
What is sufficient proof of service of the demand ?
Certificate of service verified with a statement of truth by teh person who effected service
What can debtor do upon receipt of statutory demand?
Challenge the demand;
Comply with demand;
Not respond
What must debtor do to challenge statutory demand?
Make an application to set the demand aside together with a W/S in support within 18 days of service of the demand
Court will dismiss or fix hearing
What does debtor have to do to comply with demand?
What can the Creditor not do
What is debtor reduced debt to below 5,000
Pay sum due within the specified 21 days — then matters is at an end between those parties
Or enter agreement to pay a proportion of the debt
Creditor cannot reject reasonable offers to secure/compound debt because then would no be able to prove their grounds in insolvency proceedings
If below £5000 creditor will not be entitled to present petition based on statutory demand
What is a certificate of continuing debt?
Must be provided for every _______ hearing
Statement signed by petitioning creditor which confirms the debt is still due and owing
Adjourned
(Blank copy available on network)
What is the list of creditors?
What is there are no other creditors?
List of any creditor that have given notice that they intent to appear for each hearing + indication if they intention to support or oppose the petition
If no other or Creditor is not aware of any others, negative (blank) list still needs to be produced
What must the petitioning creditor do if the hearing is adjourned?
Send notice of the adjournment to the Debtor and any other Creditors who has given notice that they wish to attend ASPA - even if debtor was in attendance
What statutory provision governs the making of a bankruptcy order
S. 271 Insolvency Act 1986
What must the court be satisfied of to make a bankruptcy order?
Court must be satisfied that the debt is payable, has not been secured or compounded OR the debtor has no reasonable prospect of being able to pay it when it falls due
The _________ is evidence that the debt is due and owing and the fact that the debtor has not _____ since the service of the _____ raises the presumption that they are __________
Certification of Continuing debt
Paid / statutory demand / unable to pay the debt
What discretion does the court have if the Debtor attends with proposals to make payments?
Court only have discretion to adjourn the petition for payment fo the debt if it is satisfied that the debt can be paid within a reasonable time
(Should seek instructions from instructing solicitors)
Court does not have the power to adjourn the petition generally, even if the order provides for monthly payments towards the debt
What must be specifically noted within a bankruptcy order?
Why?
The time the bankruptcy order is made
Beachside from that minute onwards all the bankrupt’s assets vest in the official receiver/trustee
Under s.271(3) Court does have discretion to dismiss the petition if …
It is satisfied the Debtor is able to pay debt. OR
Debtor has made an offer to secure/compound debt, which would have resulted in the dismissal of the petition if accepted, and offer has been unreasonably refused
What amounts to unreasonable refusal?
Courts would need to be satisfied that:
no reasonable hypothetical Creditor in the position of the petitioning Creditor, and in the light of the actual history as disclosed to the Court, would have refused the offer and that the refusal was therefore beyond the range of possible reasonable actions in the circumstances
What should be submissions be if: Debtor attends says they have evidence why the original debt is not owed by them
Consider:
- Debtor could have applied to set aside statutory demand and
- in any event, do their assertions amount to grounds for setting aside the statutory demand (is a genuine triable issue disclosed)
What should be submissions be if: Debtor attends says they have evidence that a judgment debt should be set aside
The court hearing the bankruptcy application is not the appropriate forum to seek to go behind the judgment
What is required to withdraw or dismiss proceedings?
Permission
Because bankruptcy viewed as a class action
What is an application to take carriage ?
By another creditor to Take over the carriage of the petition (e.g due to delay)
Creditor making the application must have given notice of intention and the petitioning creditor must be seeking to adjourn/postpone/withdraw petition
Under schedule 5, para 3 to the Insolvncy Rules 2016 Court has the same power as under ______ to …
CPR 3.1(2)(a) to shorten lengthen the time for compliance with any requirement under the insolvency rules
What costs order should be sought if a bankruptcy order is made?
Because?
No appropriate to make an reference to or seek any order as to costs
Because costs are recovered form estate directly during administration of assets, as soon as order made the creditor has no remedy against person
If instructed appropriate wording would be ‘costs in the bankruptcy’ but unnecessary
What costs order should be sought if adjourned or remains unsolved?
Ensure the costs continue to accrue so seek “costs in the petition”
Must be this, no just silent as to costs because costs will be recovered at a later date by creditor when proving debt in the bankruptcy
What costs order should be sought if petition is withdrawn or dismissed
Court has power to make summary assessment of costs
Need to be a costs scheduled served at least 24 hours before the hearing
