BANKRUPTCY
Section

Insolvency Act 1986

The Petition
Bankruptcy is commenced by petition by a creditor presenting a petition to the court or by the grant of a bankruptcy order (to obtain full or part payment of the debt)
The debtor can apply online to an adjudicator to grant a bankruptcy order.
OR
The petition can be filed by one or more of the creditors, the supervisor of an IVA, or any creditor 264 bound by an IVA.
* An Individual Voluntary Agreement [IVA] is an agreement the debtor makes with their creditors to pay back debts over five years to avoid declaring bankruptcy.

278 Bankruptcy commences on the day the order is made.
The Effect of Bankruptcy 284
Restriction: any disposition of property from the date of petition to the date of order is void 285
Bankruptcy order prevents creditors being sued by other (unsecured creditors)
The Process
Creditors' Petition
Debtor's Application
Stage 1: Establish Prerequisites
Stage 1: Establish Prerequisites

1. Debt(s) for £5,000 or more.

1. Debtor applies online to an adjudicator appointed by Secretary of

2. Debt is liquidated (a definite cash
State who makes bankruptcy order, if sum) - can be aggregated debts due 267 263H
appropriate.
to more than one creditor.

3. Debt is unsecured.

3. Debtor unable to pay debts.

4. Debtor domiciled or personally

4. Debtor domiciled in England or Wales.
265 263I
present in England or Wales.
Stage 2: Prove ground that debtor unable to pay
Stage 2: Prove ground that debtor debt or has no reasonable prospect of paying unable to pay debts

1. Serve statutory demand and wait 21

1. Debtor makes a statement of affairs days OR
which shows inability to pay debts (i.e.
268 263J

2. Obtain judgment and show that details of creditors, debts, liabilities execution or other process for debt and assets).
unsatisfied.
Stage 3
Stage 3: Present petition
Adjudicator makes bankruptcy order, if 263I
considers appropriate.
Stage 4: Court hearing of petition
 The court will discourage bankruptcy where possible. The court will ask an 273
Stage 4: Court hearing of petition insolvency practitioner to consider if
IVA is appropriate.
 Bankruptcy order made or petition dismissed.
Stage 5: If bankruptcy order made, Official Receiver Stage 5: If bankruptcy order made, Official Receiver becomes receiver and manager of bankrupt's becomes receiver and manager of bankrupt's estate estate

1. Holds office until appointment of

1. Holds office until appointment of trustee in bankruptcy.
trustee in bankruptcy.

2. Bankrupt must prepare statement of

2. Advertises the bankruptcy in the 288 affairs within 21 days.
London Gazette.

3. Any dispositions of property by

3. Any dispositions of property by 284 bankrupt since presentation of 284 bankrupt since presentation of petition are void.
petition are void.

4. Bankrupt may be required to attend a

4. Bankrupt may be required to attend a

Buy the full version of these notes or essay plans and more in our Business Law and Practice Notes.