Dealing
with debt - how to make someone bankrupt
Contents
This leaflet:
·
answers the questions you
are most likely to ask about how to make someone who owes you money
bankrupt;
·
explains what happens after
the bankruptcy order is made.
If you want to make yourself bankrupt, please read our leaflet 'Dealing
with debt - How to petition for your own bankruptcy.' If a company, rather
than an individual, owes you money, please read our leaflet 'Dealing with
debt - How to wind up a company that owes you money'.
This
leaflet is only a guide, so you may also want to read the relevant
legislation in the Insolvency Act 1986 and the Insolvency Rules 1986 as
amended.
1. What is bankruptcy?
The court
can make a bankruptcy order against an individual who fails to pay their
debts. A bankruptcy order makes sure that the assets of the bankrupt are
shared out fairly among the creditors and imposes certain restrictions on
the bankrupt. Bankruptcy does not necessarily mean that the debts of the
bankrupt will be paid.
2. Where can I get specific advice about dealing with
someone who owes me money?
Before you take any action to put an
individual into bankruptcy, you should get your own legal or financial
advice about bankruptcy and the other options available to you.
The
Insolvency Service and the courts cannot advise on specific insolvency
problems, for example whether you should make someone bankrupt or whether
you should look at alternatives. You can get advice from your local
Citizens Advice Bureau, a solicitor, a qualified accountant, an authorised
insolvency practitioner, a reputable financial adviser, or a debt advice
centre.
3. How is a bankruptcy order made?
You apply
to the court using a 'bankruptcy petition'. A bankruptcy petition is
usually presented by a creditor on the grounds that the debtor cannot pay
their debts. A bankruptcy petition can also be presented by either the
debtor or, if the debtor has already made a voluntary arrangement to deal
with the debt, by the supervisor of this arrangement.
4. How do I prove to the court
that the debtor cannot pay their debts?
The court will regard an
individual as being unable to pay their debts if either of the following
occurs:
·
A creditor who
is owed more than £750 serves a 'statutory demand' for the money due and
it is not paid or secured (for example, by a guarantee to provide
something else of the same value); or a settlement is not agreed, within
21 days, and the debtor has not applied for the statutory demand to be set
aside.
You can get the form for
a statutory demand from The Insolvency Service website at
www.insolvency.gov.uk . The forms for the statutory demand are:
§
Form 6.1 - to be used for a
debt for a specific amount which is payable now;
http://www.insolvency.gov.uk/forms/ew/Form6-01.doc
§
Form 6.2 - to
be used for a debt of a specific amount which is payable now following a
judgment or order of court; http://www.insolvency.gov.uk/forms/ew/6-2.doc
§
Form 6.3 - to
be used for a debt that is payable in the future. http://www.insolvency.gov.uk/forms/ew/6-3.doc
The completed form must
usually be served on the individual in person. The creditor must have a
certificate of service, so it is usual to employ a process server to carry
out this function (these are listed in Yellow Pages under 'detective
agencies'). The court is not involved in the issuing of statutory demands,
so no court fee is payable.
·
A creditor who
is owed more than £750 obtains judgment against the individual, and an
execution is 'unsatisfied', i.e. the sheriff or bailiff was unable to
seize enough assets to clear the debt. You can get the forms to issue a
claim for judgment from your local court, or from the HM courts and
tribunals service website at: www.justice.gov.uk/about/hmcts/index.htm
Court fees depend on the amount of the claim.
The court can tell you the precise court fee payable for a particular
claim.
A separate leaflet called
‘Statutory Demands’ is available from The Insolvency Service website:
www.insolvency.gov.uk
5. In which court should I
present a bankruptcy petition?
Not all courts can deal with
bankruptcy. Generally, you should present the petition for bankruptcy to
the court that deals with the area where the debtor has lived or traded
for the longest period in the previous 6 months.
If the debtor lives in one court
district and runs a business in another, you should go to the court
dealing with the district where the business is, as this takes priority
over the home address.
If the debtor lives or trades within
the London Insolvency District you must present the bankruptcy petition at
the High Court in London where the petition debt is £50,000 or more, or at
the Central London County Court where the petition debt is less
than 50,000.
Where the debtor lives in England and
Wales but not within the London insolvency district, you must present the
petition to the debtor’s own county court.
If you are not sure which court you
should go to, please phone your nearest county court for advice.
The address and phone number of your
local county court are listed under 'Courts' in the phone book. Look for:
'civil courts’ – ‘county courts' and not ‘magistrates' courts. You will
need to contact the court to find out if it has jurisdiction (authority)
to hear a bankruptcy case. The Courts and Tribunals Service website at: www.justice.gov.uk/about/hmcts/index/htm
has a list of county courts with bankruptcy jurisdiction and an index
that shows what geographical area they cover.
6. How do I present a
bankruptcy petition?
You cannot just complete the petition
and present it to the court. Insolvency law requires that:
·
the petition be served on
the debtor; and
·
statements of truth are
lodged at court verifying the bankruptcy petition and that it has been
served on the debtor.
You may have to make further statements
of truth if, for example, you wish to withdraw the petition. Therefore, to
ensure that you meet all legal requirements, it is usual to ask a
solicitor to issue a bankruptcy petition.
Here is a summary of the procedure
As the petitioner, you must complete a
bankruptcy petition. You should use either:
- Form 6.7 - 'Creditor's bankruptcy petition on failure to comply with
a statutory demand';
http://www.insolvency.gov.uk/forms/ew/Form6-07.doc or
- Form 6.9 - 'Creditor's bankruptcy petition where execution or other
process on a judgment has been returned unsatisfied in whole or part'.
http://www.insolvency.gov.uk/forms/ew/Form6-09.doc
- Use form 6.7 if you have issued a statutory demand but the debtor
has not complied with it.
- Use form 6.9 if a sheriff or bailiff acting on a court judgment has
been unable to seize enough assets to clear the debt.
These forms can also be accessed on our
website at
www.insolvency.gov.uk
·
You must also complete a
statement of truth (use Form 6.13A
http://www.insolvency.gov.uk/forms/ew/Form6-13A.doc) verifying the
matters giving rise to the petition.
·
If a statutory demand has
been issued, you must complete a further statement of truth verifying that
the statutory demand has been served (use Form 6.11 http://www.insolvency.gov.uk/forms/ew/form6-11.doc.)
·
The petition is filed
(handed in) at court and 3 copies made for the following purposes:
·
one to be served on the
debtor (see below);
·
one to be attached to the
statement of truth (form 6.13A) verifying the matters that led to the
petition; and
·
one to be served on any
supervisor of an individual voluntary arrangement of the debtor.
A deposit and court fee is payable on
presentation of the petition (see below).
·
The court then fixes the
place and date when the petition will be heard. Normally there must be at
least 14 calendar days between the petition being served on the debtor and
it being heard in court.
·
A copy of the petition must
be served on the debtor in person. If this is not possible the court can,
on application, order that the petition be served on the debtor by
alternative means, such as by post. This is known as 'substituted
service'. A copy must also be sent to any
supervisor of a voluntary arrangement. Immediately after service, the
petitioner must file at court a statement of truth verifying service of
the petition.
·
Use this form
6.17A Certificate of personal Service of Bankruptcy Petition
http://www.insolvency.gov.uk/forms/ew/6-17A.doc
·
Use this form 6.18A
Certificate of substituted service of Bankruptcy Petition
http://www.insolvency.gov.uk/forms/ew/6-18A.doc )
- If the debtor wishes to oppose the petition, they must give the
court a statement of truth at least 5 business days before the hearing.
- On the day of the hearing, you must prepare a list of people
intending to appear at the hearing for the court, using
·
Form 6.21
http://www.insolvency.gov.uk/forms/ew/6-21doc
·
At the hearing, you (the
petitioner), creditors (who have told you they intend to appear), the
debtor and any supervisor of any voluntary arrangement all have the right
to be heard. The court can then:
·
stay (delay or stop) the
proceedings;
·
dismiss the petition;
·
adjourn (postpone) the
hearing; or
·
make a bankruptcy order.
All the forms are in the Insolvency
Rules 1986 as amended, and you can get them from legal stationers - see
Yellow Pages. Some of the forms are available on The Insolvency Service
website at
www.insolvency.gov.uk where you can print them off for completion.
7. How much will it cost to
make someone bankrupt?
·
Petition deposit of £700
towards the costs of administration of the bankruptcy this is a one-off
payment towards the costs of the bankruptcy, and if the bankruptcy has
enough assets, the petition deposit will be refunded to you
·
Court fee of £220.
·
Any
costs for instructing a solicitor.
8. What happens after someone is bankrupt?
After making a bankruptcy order, the
court usually appoints the official receiver (a civil servant in The
Insolvency Service and an officer of the court) to be receiver and manager
of the bankrupt's affairs. The official receiver has responsibility from
the date of the bankruptcy for administering the bankruptcy and protecting
the bankrupt's assets.
The official receiver will also act as
trustee of the bankruptcy estate unless an insolvency practitioner is
appointed. If this happens, the official receiver still has a duty to
investigate the bankrupt's affairs. So 2 people may be involved in the
bankruptcy:
·
the trustee, who is
responsible for selling the bankrupt's assets and distributing the money
among the creditors; and
·
the official receiver, who
has a duty to investigate the bankrupt's affairs.
Certain restrictions and duties are
imposed on a bankrupt - for further details, please read our leaflet
'Guide to Bankruptcy' which is available from your local official
receiver’s office or from The Insolvency Service website:
www.insolvency.gov.uk
9. Can anyone appeal against or stop the bankruptcy?
·
The court may
'annul' (cancel) a bankruptcy order. The bankrupt (and anyone else) can
apply for an order to be annulled if:
-
the court did not have all the relevant facts when
making the bankruptcy order and would not have made an order had it
known those facts; or
-
the bankrupt can pay all the debts in full; or
-
the bankrupt enters into a voluntary arrangement with
the creditors.
·
An application
to annul the bankruptcy order can be made at any time (even after the
bankrupt's discharge). For further information about annulment of the
bankruptcy order, please refer to our leaflet 'Can my bankruptcy be
cancelled?' which is available from The Insolvency Service website:
www.insolvency.gov.uk
·
The bankrupt
can apply for the ‘rescission’ (cancellation) of the bankruptcy order, if
there has been a change in circumstances since the bankruptcy order was
made. A rescission will usually only be granted in exceptional
circumstances and normally requires the consent of the petitioning
creditor.
·
The bankrupt
can 'appeal' against a bankruptcy order on a point of law. As a result of
an appeal, the court can cancel the bankruptcy order or otherwise change
its decision. The bankrupt should appeal within 4 weeks of the order being
made.
·
Bankruptcy
proceedings can be 'stayed' (stopped). The bankruptcy proceedings are
usually only stayed while waiting for an application for an annulment, an
appeal or a rescission of the bankruptcy order, or while an individual
voluntary arrangement is being proposed.
10. Where can I get more information?
Our
publications give more details of insolvency procedures. Please see
'Statutory Demands', 'Guide to Bankruptcy’ and ‘A Guide for Creditors’.
You can
obtain further copies of this booklet from The Insolvency Service website:
www.insolvency.gov.uk
All of our publications are also available on this website.
For
general enquiries you can contact The Insolvency Service Insolvency
Enquiry Line on 0845 602 9848 or email
Insolvency.Enquiryline@insolvency.gsi.gov.uk
The
Courts Service publishes a series of information publications and contact
details on their website at:
www.justice.gov.uk/about/hmcts/index/htm
This
publication provides general information only. Whilst every effort has
been made to ensure that the information is accurate, it is not a full and
authoritative statement of the law and you should not rely upon it as
such. The Insolvency Service cannot accept responsibility for any errors
or omissions as a result of negligence or otherwise.
11. Bankruptcy terms - what do
they mean?
Annulment of a bankruptcy order
- a court order that cancels the bankruptcy order.
Bankruptcy order
- a court order that places an individual
into bankruptcy.
Bankruptcy petition
- a request to the court for an individual
to be placed into bankruptcy, giving the reasons why.
Creditor
- someone to whom the individual owes money.
Debt
- the money the individual owes.
Debtor - the individual who owes money.
Discharge
- freed from bankruptcy or freed from the restrictions of bankruptcy.
Execution
- if a creditor has obtained judgment against the individual and has not
been paid, the creditor can apply to the court for 'execution', which
gives the sheriff/bailiff the power to seize the individual's goods to pay
the debt. Individual Voluntary Arrangement (IVA) - a formal arrangement by
which a debtor pays their creditors, either in full or in part. The debtor
would need to apply to the court with the help of an authorised insolvency
practitioner, who would supervise the arrangement and pay the creditors in
accordance with the accepted proposals.
Insolvency practitioner
- an authorised person who specialises in
insolvency, usually an accountant or solicitor. Insolvency practitioners
are authorised by the Secretary of State or one of certain recognised
professional bodies.
Liabilities
- the money the individual owes.
Trustee - the trustee is either the official receiver or an insolvency
practitioner who takes control of the bankrupt's assets. The trustee's
main duties are to sell these assets and share the money out among the
creditors.
Rescission
- one of the ways in which the court can cancel the bankruptcy order.
Recognised professional body
- a professional body that the Secretary of State allows to authorise a
person to act as an insolvency practitioner.
Statement of truth
– Shows the information provided is true.
Verify - confirm that a document or statement is true.
This booklet provides general
information only. Every effort has been made to ensure that the
information is accurate, but it is not a full and authoritative statement
of the law and you should not rely on it as such. The Insolvency Service
cannot accept any responsibility for any errors or omissions as a result
of negligence or otherwise.
© Crown copyright 2011.
The information in this booklet is
subject to Crown copyright protection.
The Crown copyright material may be
reproduced free of charge in any format or media without requiring
specific permission. This is subject to the material being reproduced
accurately and not being used in a derogatory manner or in a misleading
context. Where the material is being published or issued to others, the
sources and copyright status should be acknowledged. If there were a
restriction on reproduction, any other proposed use of the material would
be subject to the approval of Her Majesty’s Stationery Office Unit.
Application should be made in writing to the Copyright Unit, HMSO, St
Clements House, 2-16 Colegate, Norwich NR3 1BQ.
The permission to reproduce Crown
copyright material does not extend to any material in this booklet which
is identified as being the copyright of a third party. Authorisation to
reproduce such material would need to be obtained from the copyright
holders concerned. For further details on the licensing of Crown
copyright, see current guidance at http://www.hmso.gov.uk/guides.htm
issued by Her Majesty's Stationery Office.
URN11/1004 |
