Bankruptcy petition

There are three ways a bankruptcy petition can take place in the UK:

• You can petition for bankruptcy, known as a debtor's petition
• A creditor's petition, for a creditor to apply for a bankruptcy order to be made against you
• A supervisor's petition, which your supervisor in an IVA would use

Please note that if you are being threatened with bankruptcy then you must act quick. There are steps that can be taken to protect you, but only before matters go too far.

What are the grounds for you to present a bankruptcy petition?

To present a bankruptcy petition you only need to meet the ground that you are unable to repay your debts. This is shown by submitting a statement of affairs with your petition form at court. On the statement of affairs you will detail your financial position.

Please note that although there is only one ground the court can dismiss your petition if the Insolvency Rules have been contravened. This can include matters such as your forms not being completed in the required format. See bankruptcy forms for more information.

When deciding if you are unable to repay your debts the court will usually look at whether your liabilities exceed your assets. Don't think for one minute it is that simple though. It may be the case that you have liabilities which are due to arise in the future, for example the shortfall on a repossession and possibly personal guarantees that have not yet been called in. These will have to be taken into account also. You may also be in the position where your assets are more than your liabilities but for some reason you are unable to raise the money to repay your debts. Your inability to repay could mean that you meet the grounds to petition for your bankruptcy.

What is the procedure to petition for bankruptcy?

The procedure for you to petition for bankruptcy is outlined below:

• Even if bankruptcy is your only option, seek help first. This is a must. Even if you have to petition for bankruptcy because there is no other option there can be some unwanted outcomes, make sure that you know what they are.
• Be prepared for the bankruptcy. There are a number of steps that you can personally take to make the process much easier on you. Don't forget things like your bank account being frozen and any business closed. You still need to support yourself even after bankruptcy.
• It's ideal to make an appointment at court.
• Make sure that you meet the legal requirements to petition, you do not want to be turned away or have your petition dismissed. Remember, you will be expected to present your bankruptcy petition with a statement of affairs and the required fees.

What is the consequence of presenting a bankruptcy petition?

Firstly you will be seen by a court clerk who will check your documents and fees (If the clerk is too busy then you may be asked to book an appointment). You will then either:

• Have your petition heard straight away
• Be turned away
• Be asked to return at another date.

  This will depend on factors such as whether:

  • You have disregarded any of the rules laid out under Insolvency law. An example of this would be your forms not meeting the required standard.
  • An IVA is in place
  • You have the required fees
  • The court has any free appointments
  • You have attended the correct court
  • Etc.

Providing your petition is in order and the bankruptcy court has room the hearing will usually take place. If you are in an IVA and considering bankruptcy then please note that the process is slightly different for you.

One not so well known consequence of a bankruptcy petition being presented is that other legal proceedings, whether in progress or about to commence, can be put on hold at the courts discretion.

Another consequence of the petition is that an Interim Receiver can be appointed to take control of your property. This will usually happen where the court believes the property to be at risk.

The Chief Land Registrar will also be notified of the petition for registration in the register of pending actions. This could have implications if you are about to sell your property. If you plan on transferring any property before petitioning for bankruptcy then please seek professional advice first. There may be significant consequences if you do.

When can a creditor petition?

A creditor can petition for your bankruptcy on the same grounds as you, that is you are unable to repay your debts. You must owe the creditor more than £750 and that debt must be unsecured. The creditor will also have to follow strict procedure to present a petition and cause the bankruptcy order to be made against you.

Can my IVA supervisor petition for my bankruptcy?

Yes. If you default on your IVA then there may be a clause in the terms that obligate your supervisor to present a bankruptcy petition in respect. There are three grounds under which he/she may present a default petition:

• You failed to comply with your obligations under the IVA
• You gave false or misleading information when the IVA was being arranged
• You have failed to comply with your supervisors reasonable requests

For more information about the contents of the petition and statement of affairs please go the bankruptcy forms page.