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Personal Insolvency Notes

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Core Module: BLP Paper B

Partnerships Personal Insolvency 2 options for a person / partnership that is insolvent (i.e. has no more money - cannot continue to do business):

1. Bankruptcy

2. Individual Voluntary arrangement (IVA)

Bankruptcy Definition: Court order that declares a person to be insolvent. He is unable to pay his debts / has no reasonable prospect of paying his debts when they fall due. Bankruptcy vests property in a trustee for distribution. At the end of one year the debtor is released from liability.

Procedure:

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Creditor's petition: must show that a) Debt of at least PS750 (liquidated and unsecured) b) Debtor appears to be unable to pay / no reasonable prospect of being able to pay (creditor mus serve statutory demand and it is unpaid after 3 weeks. There must also be no outstanding application to have statutory demand set aside); OR debtor has failed to satisfy execution of judgment debt. c) Debtor is domicile

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1 Petition is presented (i.e. filed in court) Petition served on debtor personally Hearing: est. 14 days after service Bankruptcy order given to debtor Debtor's petition: a) petition on grounds of inability to pay b) statement of affairs hearing of the debtor's petition Bankruptcy order made; OR court appoints insolvency practitioner to prepare report to consider IVA. Official Receiver (OR) appointed Trustee in bankruptcy appointed by creditors Property vests in trustee - (but there are exceptions - all things necessary for working /
living; Also - if the house is jointly owned then trustee only holds bankrupt's share; Spouse will also have a right of occupancy in the family home S.30 Family Act. If the bankrupt lives with children under age of 18 then he may also have a right of occupancy under S.338 Insolvency Act. However, after 1 year the rights of creditors outweighs spouse's rights unless there are "exceptiona circumstances". Income Payments Order & agreements: Trustee can apply to court for an income order (so trustee gets bankrupt's income also) but court must leave enough for reasonable needs. This

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