Making a Debtor Bankrupt | Client Successfully Obtains Bankruptcy Order against Debtor
KANGS has advised and assisted our client in insolvency proceedings by obtaining a Bankruptcy Order against an individual to whom she had loaned one hundred thousand pounds.
If a creditor is owed a debt of five thousand pounds or more, one of the recovery options available is the issue of a Bankruptcy Petition requesting the Court to make an Order declaring the debtor bankrupt, which will result in his affairs being conducted by a Trustee in Bankruptcy.
Pursuing a debtor in this manner may not always be the most effective approach, as it will involve the amounts due to all creditors, including those with preferential claims such as HMRC, to be repaid proportionately out of whatever assets are available for recovery.
However, some circumstances leave no alternative other than to follow this extreme path.
In this case, the debtor ostensibly managed to repay the debt that later defaulted following police intervention. KANGS was instructed to assist in recovering the balance of the debt which remained outstanding.
Tim Thompson of KANGS explains the circumstances and how a successful result was achieved.
The Background
A loan made by our client to the debtor of £100,000 had been repaid in full. However, soon after the apparent repayment, an Account Freezing Order was obtained by the Police against our client’s bank account, alleging that the monies used to repay our client had been obtained by the debtor through a fraudulent ‘Bounce Back Loan’ provided by the Government as part of its emergency Covid-19 Pandemic measures. This rendered those funds as being suspected as representing the proceeds of crime and becoming ‘recoverable property’ via an Account Freezing Order.
The amount in the account at that time and seized by the police amounted to £75,000 which meant that the debtor still owed that amount to our client.
A fresh agreement was concluded with the debtor for the repayment of this £75,000. The debtor only repaid £20,000 leaving the sum of £55,000 outstanding.
In the prevailing circumstances it was deemed appropriate to pursue recovery of the debt amounting to £55,000 plus interests and costs by way of bankruptcy proceedings.
Consequences of a Bankruptcy Petition & Bankruptcy Order
Bankruptcy petition
Immediate consequences include the following:
- bank accounts may be frozen,
- the petition can only be withdrawn with court permission,
- other creditors are likely to become aware of the petition making it difficult to negotiate any form of out of court settlement,
- no subsequent transactions can be concluded without leave; any that are, will be void,
- the debtor’s name will be forwarded to the Chief Land Registrar and will appear on the Bankruptcy Register as a Pending
Bankruptcy Order
The consequences for a debtor are severe including:
- the Bankruptcy Order will be advertised in the London Gazette and such newspapers as the Official Receiver’s Office deems necessary,
- the family home may be sold,
- any business will probably be disposed of,
- if a company director, it will be necessary to resign,
- credit ratings will be severely damaged,
- the consequences of social stigma may be overwhelming.
How We Assisted Our Client With a Statutory Demand
The steps taken by the team at KANGS included:
- attending our client considering her position and advising on the best procedural strategy to follow,
- preparing and serving a Statutory Demand, giving the debtor a period of 21 days in which to pay the outstanding debt in full,
- following the debtor’s failure to comply with the Statutory Demand, preparing and serving the Bankruptcy Petition, which was supported by all the required documentation,
- conducting all required procedural procedures,
- endeavouring to conclude a negotiated settlement with the debtor,
- identifying and instructing appropriately experienced counsel to represent our client at the Hearing,
- attending both client and counsel at all necessary times.
The Hearing
As requested, the Court found in favour of our client and declared the debtor bankrupt, thereby transferring his affairs into the hands of his Trustee in Bankruptcy. Our client was delighted with this outcome which will support her efforts to recover her funds from the debtor.
How Can We Assist You?
Both being owed money by someone reluctant or struggling to repay, or owing money and facing recovery action, bring their own complications and stresses.
The team at KANGS is highly experienced assisting and supporting clients, whether individuals or corporate entities, who are potentially facing or involved in insolvency proceedings of every nature, whether as creditor or debtor.
Should you require assistance and guidance with any form of debt dispute, insolvency, liquidation or bankruptcy proceedings, our team will be delighted to hear from you. Please do not hesitate to contact us using the details below:
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
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