Previous transactions

When petitioning for bankruptcy many people ignore the fact that transactions made in the years before the bankruptcy may be investigated and subsequently reversed or altered. This is considered an important area of bankruptcy as it provides an element of protection for your creditors. It may also lead to significant consequences for you. I will explain as follows.

The outcome of the investigation into these transactions could be that:

• No further action is required
• The trustee may apply to the court to have a certain transaction(s) reversed or altered. This possibly means money or property being taken back from the other person that you were party to the transaction with.

On consideration of your behaviour and intentions at the time of the transaction you may also be:

• Not be guilty of any wrongdoing
• Suspected of a bankruptcy offence, punishable by imprisonment, a fine or both
• Deemed blameworthy and subject to a bankruptcy restriction order

It is likely that the other person party to the transaction will be involved in the bankruptcy proceedings at this stage.

For example, if you repay a friend or family member back before bankruptcy then the trustee in bankruptcy may seek to take that money back. If you would like further information about this kind of transaction then use my helpline for help.

What type of transactions can be affected?

There are six main types:

• transactions at an undervalue (TUV)
• preference transactions
• Property disposals made between the date of petition and the date that a trustee is appointed (or the Official Receiver becomes trustee)
• excessive pension contributions
• transactions defrauding creditors
• extortionate credit transactions

Whether or not an application to the court to have the transaction reversed will be successful will depend on a number of factors such as:

• the transaction date
• who the burden of proof lies with
• your financial position at the time the transaction took place
• your intentions at the time the transaction took place
• your relationship with the other party

To establish whether you have been party to such a transaction and to work out what to do accordingly please use the helpline.

It is important to stress that the six types discussed above cover a large number of transactions. Examples include:

• repaying debts to family or other associates prior to your bankruptcy
• transactions that have taken place in marriage proceedings
• Selling assets for less than their true saleable value prior to bankruptcy
• transactions putting assets out of the reach of creditors

There are many more.

Who can be affected?

Both parties of the transaction may be affected depending on the circumstances of the case. The trustee in bankruptcy has investigative powers which may be exercised.

If you are unsure if this will affect you or any of your associates then it is extremely important that you seek advice before bankruptcy. At least you can then make an informed choice on how to deal with the situation as opposed to you and your family or friend getting a nasty surprise. As I mentioned earlier, please feel free to use the helpline.