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 Administration Order
Administration Order Maximum Debt £5,000
An individual can seek the full protection of the court to settle debts of less than £5000 (there is not a vote, as with an IVA). The court will decide if the arrangement is fair to the creditors.
The basis of this arrangement is to try to avert the bankruptcy of debtors who owe (in the courts opinion) a small amount. Failure to maintain the administration order can result in court action by a creditor for a county court judgment or bankruptcy.
Bankruptcy
Minimum Debts of £750
An individual or a creditor can apply for a bankruptcy order if the debt is at least £750. The amount of the debt must not be in dispute. If an individual owed you £800 for a service you supplied and would not pay you due to a dispute, you could apply for a bankruptcy order, however, the court would reject the order based on the debtor raising the dispute.
The court will not allow an order if there is any doubt whatsoever as to the validity of the debt (even if the debtor is more than likely lying). If the individual could not pay you due to a lack of money, you would usually be successful.
The usual time for a bankrupt to automatically be discharged is two years if it is your first bankruptcy and unsecured creditors are less than £20,000, and three years if unsecured creditors are in excess of £20,000.
Personal Bankruptcy
The aim of most creditors (the one’s you owe money to) is not to make an individual bankrupt. Most bankruptcies have little in the way of compensation for unsecured creditors. The government services are more likely to petition your bankruptcy than, say, a trader you owe money to.
It is also common for an individual to start a bankruptcy petition themselves: out of desperation to avoid the hounding of some overzealous creditors.
The purpose of bankruptcy is to convert your possessions, and any wages you receive, into lump sum and installment payments for creditors. A debtors purpose to apply for their own bankruptcy is to form a moratorium (a group of creditors) to agree part repayment of all outstanding debts, and when the agreed repayment has been met, to have a ‘clean slate’.
Individual creditors cannot take action against you. They must make a claim through the ‘trustee’ (the name of the person who controls a bankruptcy) or write off their debt. When appointed the trustee will advertise your demise in a number of newspapers to give all of your creditors a chance to make a claim against the bankruptcy.
It is also the responsibility of the bankrupt to make an honest list of all creditors: as a bankruptcy is also a chance to start again the bankrupt should ensure every creditor is notified. Not that a creditor could make a claim against you after a bankruptcy, but it will get all your creditors of your back.
If you own your home you would be fortunate to keep it. You can keep household ‘essentials’: bed, fridge, heating appliances etc. But not, TV’s, video recorders, computers (unless used for work, or used to get work). All ‘tools of trade’ are protected, but will be scrutinized (a new transit van is not a necessity – buying a well used second hand van would be a likely suggestion from the bankruptcy trustee).
A bankruptcy will normally last until the third anniversary of the bankruptcy order. During this time you are not allowed to hold a public office, become a company director (or in all but name run a business) and you must not apply for credit over £250 without notifying the lender of your bankruptcy. Your credit file will show your bankruptcy for six years from the bankruptcy order.
There is some talk of allowing some bankrupts to become company directors in as little time as three months from the bankruptcy order. The basis of the issue is: should an entrepreneur who started a business, a sound and well run business, but lost control of the company’s survivability through bad luck, ‘just a few more sales’, ‘a bit more backing from the bank’ etc. be allowed to try again once all matters have been explained to, and sanctioned by the trustee? This option gets my vote.
Partnership Insolvency A partnership can enter into a Partnership Voluntary Arrangement (PVA). In a liquidation of a partnership, the personal assets of the partners are at risk if insufficient assets are available from the realized partnership assets. Relevant Articles: |
