When can a bankruptcy petition be made?
It is important to understand that a bankruptcy order should only be made to the court after a statutory demand has already been made to the debtor and they have failed to comply. This being said, there are regulations to specify when a petition for bankruptcy can be made, for example, a petition can not be made if the debtor has made an application to set aside a statutory demand.
Creditors can only petition for bankruptcy for their debt to be repaid if the debt is for a minimum sum of £5,000. This debt must also be a liquidated sum, which means it is a final sum that cannot, for example be an invoice that has not yet been paid. Any debt that is petitioned for must also be genuine; If the debt owed can be disputed, then a bankruptcy order cannot be made.
Should the debt in question be secured against an asset such as a home or other property, creditors cannot petition for bankruptcy.
What should I do if I am served with a bankruptcy petition?
In the event that you are served with an order for bankruptcy, it’s important to take the right steps to protect yourself. First of all, you must ensure that you are clear on:
When the petition for bankruptcy was served
Why was the petition served - what is the creditor owed?
When the bankruptcy order hearing has been listed for - you must have been given enough notice of the hearing, so anything less than 14 days is insufficient.
When reading through the content of the petition made against you, you must be careful to make sure that the petition contains all information required by Insolvency laws. For example, the petition must state the debt that is owed, what the debt is owed for, and sufficient information for you to understand if the debt stated is correct, or whether it can be disputed.
As stated above,if you receive a petition, it must be in response to a statutory demand previously served on you. If you believe that you have not received a statutory demand, then it is important to ask for proof that a statutory demand was served. If you did receive a statutory demand, but have applied to the court for it to be set aside so that you can repay or dispute debts, then a petition should not have been filed. Even if you have not yet had a response from the court, a petition for bankruptcy should not be issued in the event that an application has been made to set aside a statutory demand for the same debt.
If you do owe the debts stated in a petition for bankruptcy, unfortunately, the petition cannot be stopped simply by repaying the debts. Once a petition is filed, the court will make the final decision, even when debts are paid or the creditor agrees to a repayment plan or settlement. As a result, you should seek legal assistance.
Whilst repayment does not close a petition against you, this is not to say that it isn’t possible to agree to a payment plan. You should contact the petitioner creditor as soon as possible to agree on repayment terms; whilst they may not agree to dismiss the petition, they may decide to adjourn the petition in order to allow you enough time to meet new repayment terms.
If you dispute the debt or information stated in a petition, or have not received a statutory demand for repayment, then it’s vital that you do not ignore it. By failing to attend a bankruptcy hearing, an order will simply be made in your absence, so it is imperative that you gather evidence to support your dispute to debt, or provide that a statutory demand was received prior to a bankruptcy order.
All evidence must be gathered in writing and submitted to the creditor, with enough time before the court hearing to respond. It is advised that your notice to oppose the petition against you must be filed at least 5 business days before the hearing.
The outcomes of a bankruptcy hearing
After a bankruptcy petition hearing, there are a range of actions that the court may make. Firstly, should the court find that the petition against you is filed incorrectly, it would be dismissed, ending proceedings. In contrast, in the case that the bankruptcy order was granted, this would make you bankrupt, and your assets would be sold in order to repay creditors.
In some cases, the court may make the decision to adjourn a bankruptcy hearing, either to give time for you or creditors to file further evidence in order for a decision to be made, or to give you time to repay debts or seek further legal advice.
Personal Insolvency Help
If you have been served with a bankruptcy petition or are facing any form of personal insolvency, it’s important to seek the help of a licensed insolvency practitioner to learn more about the options that are available.
If in addition to facing a bankruptcy hearing you have other debts, it’s important to learn whether you would be able to seek solutions to help you escape debt, such as a debt management plan, or an Individual Voluntary Arrangement.
To learn more about personal insolvency solutions and to seek a consultation with BEACON, please call us on 02380 651441.