Personal Insolvency Flashcards
(30 cards)
What are the two main personal insolvency procedures?
1) Individual Voluntary Arrangement (IVA)
2) Bankruptcy
What is individual voluntary arrangement?
A contractual proposal by an individual debtor to repay creditors (in whole or in part) over time, supervised by an Insolvency Practitioner
What is the process of an IVA?
1) Proposal
2) Nominee’s report
3) Interim order
4) Creditor’s approval
What happens at proposal step of IVA?
Debtor with an IP submits proposal and statement of affairs
What happens at Nominee’s report on IVA?
Assesses viability and recommends if creditors’ meeting should be held
What happens at interim order steps of IVA?
14-day moratorium to stop enforcement action
What creditors’ approval is needed for IVA?
75% by value of voting, with no more than 50% opposition from non-associates
What is the effect of an IVA?
Binds all unsecured creditors
Advantages of IVA?
Avoids bankruptcy, flexible and can bind all unsecured creditors
Disadvantages of IVA?
Longer duration, uncertain approval, doesn’t bind secured creditors
Who can petition for bankruptcy?
Creditors or Debtors
When can a creditor petition for bankruptcy?
If liquidated debt is at least £5,000
When can a debtor petition for bankruptcy?
If unable to pay debts, must file a statement of affairs
How is inability to pay debts proven?
1) Unpaid statutory demand (21 days)
2) Unsuccessful execution of judgement
What is the effect of bankruptcy orer?
1) Trustee takes control of assets
2) Debtor loses ownership of estate
What are restrictions on those that go bankrupt?
1) Cannot be a director
2) Cannot get £500+ credit without disclosing
3) Cannot make gifts
What are the powers of a Trustee in bankruptcy?
1) Sell assets, run business, disclaim onerous property
2) Recover assets via claims
How does a trustee distribute proceeds in bankruptcy?
1) Secured creditors
2) Bankruptcy expenses + Trustee’s fees
3) Preferential creditors (2 tiers)
4) Unsecured creditors
5) Statutory interest
6) Spouse’s provable debts
7) Any surplus -> Bankrupt
What must the bankrupt have the duty to do?
1) Give information
2) Attend on the Trustee
3) Assist in realisation of assets
What is non-compliance of bankruptcy effected with?
Criminal offence / suspension of discharge
What is bankruptcy discharge
Usually automatic after 1 year, releasing debtor from most debts
What is a bankruptcy restriction order?
Between 2 and 15 years, prohibits being director or obtaining £500+ credit without disclosure
What are voidable transactions?
1) Transaction at Undervalue
2) Preference
3) Transaction defrauding creditors
What is a transaction at undervalue?
Value provided significantly less than received
