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If an individual debtor is unable to pay your debt as it falls due then one of the options available to you would be to issue a Bankruptcy Petition against that individual.
Conditions that need to be satisfied before a Petition can be issued
In order to issue a Bankruptcy Petition you must show:-
- The debt owed to you is for more than £5,000.00;
- The debt is for a monetary sum which is due immediately or at some future time and is unsecured;
- The debtor is unable to pay the debt or is unlikely to be able to pay the debt
- The debtor has not made an application to set aside the statutory demand (which is usually required to be served as a pre-requisite to the issue of the Bankruptcy Petition)
Bankruptcy Petition Procedure
The Petition needs to be issued at the debtor’s local Court. The Petition must be personally served upon the debtor. Following personal service of the Bankruptcy Petition, if the debtor is in a position to settle the debt then at that point in time you would normally expect payment to be made. If payment is not made then this may be because the debtor is actually insolvent and the likelihood of recovering the debt is probably remote (unless the debtor does have assets tied up in property). The Bankruptcy Petition will contain a notice of when the Petition will be heard at Court
Please note it is inappropriate to use bankruptcy proceedings as a form of debt recovery where the creditor knows that the debt is likely to be genuinely disputed.
Cost of a Bankruptcy Petition
In addition to solicitors fees, upon presentation of the Bankruptcy Petition the creditor must pay:-
- A deposit to cover the initial Trustee in Bankruptcy costs of £990.00
- The Court issue fee of £280.00
If a Bankruptcy Order is made
If ultimately a Bankruptcy Order is made against the debtor then the Official Receiver/Trustee in Bankruptcy would be appointed to gather in the assets of the bankrupt and to distribute those assets amongst any unsecured creditors.
Pros and Cons of Bankruptcy Petitions
It is not a cheap process but some creditors prefer issuing Bankruptcy Petitions because it can be less time consuming than pursuing a matter through the County Court where ultimately Judgment may be obtained but even then enforcement proceedings still need to be taken. However, it is considered a draconian step to issue a Bankruptcy Petition against someone and should not be done lightly. It is important that legal advice is taken before you either issue/serve a Statutory Demand upon a debtor and also if subsequently you issue Bankruptcy proceedings. Likewise, if as a debtor you are served with a Statutory Demand it is very important that you seek legal advice as a matter of urgency as an application to set aside a Statutory Demand has to be made very quickly.
If you require further advice in connection with Statutory Demands or Bankruptcy Petitions please contact Usman Anwar on 0161 785 7296 or Asa Cocker on 0161 785 3500 in the Debt Recovery team