Mis-spelling for bankruptcy ie: bankrupsy

What is Bankrupsy?

In the last few years there’s been a noticeable trend in the rise of bankruptcies especially amongst young people nearly 19% of individual bankrupts being under the age of 30.

It is not the easy option people perceive and can cause untold problems in the years to come.

Bankrupsy is one way of dealing with debts you cannot pay. It is a Court Order that you can apply for if you’re in debt. It may be the best way for you to free yourself from excessive debts. The bankrupsy proceedings:

• Free you from overwhelming debts so you can make a fresh start, subject to some restrictions; and 
• Make sure your assets are shared out fairly among your creditors.

Anyone can go bankrupt, including individual members of a partnership. There are different insolvency procedures for dealing with companies and for partnerships themselves. Separate publications about these insolvency procedures are available

If bankrupsy proceedings are taken against you, or you are thinking of making yourself bankrupt, you should seek your own legal or financial advice from a debt advice centre, Citizens Advice Bureau, a solicitor, a qualified accountant, an authorised insolvency practitioner, or a reputable financial adviser.  

Other organisations also offer insolvency advice and debt counselling. Some of them are entirely reputable and offer a professional service. However, others are controlled by individuals with no obvious qualifications who appear to be motivated mainly by a desire to exploit an already difficult situation. Beware, particularly of unsolicited approaches through the post or by telephone.

If you are not bankrupt:

Bankrupsy is a serious matter. You will have to give up any possessions of value and your interest in your home. It will almost certainly involve the closure of any business you run and the dismissal of your employees. Bankrupsy will also impose certain restrictions on you.

You do not have to become bankrupt just because you are in debt. Look at the alternatives to bankrupsy as soon as possible in case they are more suitable in your situation.

How am I made Bankrupt?

At present there are two main ways: Please check current fees at your local court

• By Debtor’s petition: This is where you make yourself bankrupt. To do this you must contact your local court to find out where your nearest county court dealing with bankrupsy is situated. At present you have to pay £150 court fee and £325 deposit.
• By Creditor’s petition: If you owe £750 or more then they can make a creditor’s petition for your bankrupsy at a County Court.
• A bankrupsy order can still be made even if you refuse to acknowledge the proceedings or refuse to agree to them. You should therefore co-operate fully once the bankrupsy proceedings have begun. If you dispute the creditor’s claim, you should try and reach a settlement before the bankrupsy petition is due to be heard. Trying to do so after the bankrupsy order has been made is both difficult and expensive

Where is the Bankrupsy Order made?

Bankrupsy petitions are usually presented at the High Court in London or at a county court near to where you trade or live. A petition can be presented against you even if you are not present in England or Wales at that time. This can happen when: 

• You normally live in, or within the previous 3 years have had residential or business connections with, England or Wales.  

Sometimes government departments start bankrupsy proceedings in the High Court in London or in one of the District Registries. If you did not trade or do not live in the London area, your case will usually be transferred to the appropriate local county court and, if a bankrupsy order is made, it will be dealt with by the local Official Receiver.

Once the bankrupsy order has been made, it is advertised in “The London Gazette” (an official publication which contains legal notices) and in a local or national newspaper (or both). In addition the Official Receiver will give written notice of the order to a number of organisations.

Who will deal with my Bankrupsy?

The Official Receiver

An Official Receiver is appointed by the Secretary of State and is an officer of the court. The Official Receiver has responsibility for administering your bankrupsy and protecting your assets from the date of the bankrupsy order. He or she will also act as trustee of your bankrupsy estate unless an insolvency practitioner is appointed.

The Official Receiver is also responsible for looking into your financial affairs for the period before and during your bankrupsy. He or she may report to the court and has to report to your creditors. The Official Receiver must also report any matters which indicate that you may have committed criminal offences in connection with your bankrupsy or that your behaviour has been dishonest or you have been in some way to blame for your bankrupsy.

The Official Receiver will give notice of the bankrupsy order to local authorities, utility suppliers, courts, sheriffs, bailiffs, National Savings and Investments (premium bonds), the Land Registry and any relevant professional bodies. Enquiries will also be made of banks; building societies; mortgage, pension and insurance companies; solicitors, landlords and any other persons or organisations who may be able to provide details of any assets or liabilities that you have, or have had, an interest in (either on your own or jointly with others). Third parties will also be asked about any other matters relating to your bankrupsy. If you are unhappy with the way your case is handled by the Official Receiver you should follow the procedure set out in our leaflet 'Complaints Procedure: Information on making a complaint'.

An insolvency practitioner

Insolvency practitioners are individuals who specialise in insolvency work. An insolvency practitioner, who must be authorised by either the Department of Trade and Industry or the appropriate professional body, can be appointed trustee instead of the Official Receiver. He or she is then responsible for disposing of your assets and making payments to your creditors.

Who do I need to tell?

• Your mortgage lender, if you have one, the reason is they may repossess your house if you can’t pay.
• Banks and building societies: when opening new accounts you must tell them you are a bankrupt, just as you must inform your trustee of any money in the account, that is above that needed for basic living.
• Utilities companies, phone electricity etc, etc. They often want a deposit in advance for their services.

When will my Bankrupsy end?

You are usually discharged from bankrupsy after one year and the money you owe can usually be written off.

If you were made bankrupt on or after 1 April 2004 

You will be automatically freed from bankrupsy (known as “discharged”) after a maximum of 12 months. This period may be shorter if the Official Receiver concludes his enquiries into your affairs and files a notice in court. 

If you were made bankrupt before 1 April 2004

If this is your first bankrupsy, you will be discharged automatically on 1 April 2005 or, if you currently expect your discharge date to be before 1 April 2005, you will receive your discharge on that earlier date.

If you have been an undischarged bankrupt at any time during the 15 years before the current bankrupsy (unless the previous bankrupsy has been annulled) you will be discharged automatically on 1 April 2009. Or you may ask the court for a discharge 5 years after the date of the bankrupsy order, but the court may refuse or delay your discharge, or grant it conditionally on terms requiring you to make some payments out of your income.

You will also become free from bankrupsy immediately if the court annuls (cancels) the bankrupsy order; this would normally happen when your debts and the fees and expenses of the bankrupsy proceedings have been paid in full or the bankrupsy order should not have been made.

On the other hand, if you have not carried out your duties under the bankrupsy proceedings, the Official Receiver may apply to the court for your discharge to be postponed. If the court agrees, your bankrupsy will only end when the suspension has been lifted and the time remaining on your bankrupsy period has run. If your discharge has been suspended (stopped) prior to 1 April 2004, you should contact the Official Receiver for information about how and when you may be discharged from bankrupsy.

Debts

Discharge releases you from most of the debts you owed at the date of the bankrupsy order. Exceptions include debts arising from fraud and any claims which cannot be made in the bankrupsy itself. You will only be released from a liability to pay damages for personal injuries to any person if the court thinks fit.

When you are discharged you can borrow money or carry on business without the restrictions previously referred to. You can act as a limited company director unless you are disqualified from doing so as a result of a separate order arising out of your involvement with a company.

Assets you owned or obtained before your discharge

When you are discharged there may still be assets that you owned, either when your bankrupsy began, or which you obtained before your discharge, which the trustee has not yet dealt with. Examples of these may be the interest in your home, an assurance policy or an inheritance. These assets are still controlled by the trustee who can deal with them at any time in the future. This may not be for a number of years after your discharge.

With some assets - such as your home and some types of assurance policy - your spouse, a partner, a relative or friend may want to buy your interest. He or she should get in touch with the trustee straightaway to find out how much they would have to pay.

You must tell the Official Receiver about assets you obtain after the trustee has finished dealing with your case but before you are discharged. These assets could be claimed to pay your creditors. You have a duty to continue to assist your trustee after you have been discharged.

Assets you obtain after your discharge

Usually you may keep all assets you acquire after your discharge

What are your duties as a Bankrupt?

When a bankrupsy order has been made, you must:

• Comply with the Official Receiver’s request to provide information about your financial affairs. The Official Receiver may request that you attend at his or her office for an interview - the Court will give you the address of the Official Receiver. (Note: usually before the interview, you will be sent or given a questionnaire which you should fill in as fully and accurately as possible.) If the Official Receiver does not ask that you attend at the office for an interview, you will be sent a letter which will set out what is required of you. Again it is likely that you will be asked to complete a questionnaire. You should note that in either circumstance, any questionnaire completed before the bankrupsy order, supplied to you by an adviser or another third party, will not be acceptable; 
• give the Official Receiver a full list of your assets and details of what you owe and to whom (your creditors); 
• look after and then hand over your assets to the Official Receiver together with all your books, records, bank statements, insurance policies and other papers* relating to your property and financial affairs;
• Tell your trustee about assets and increases in income you obtain during your bankrupsy. (Note: by law you must inform your trustee of any property which becomes yours during the bankrupsy. Such property includes lump sum cash payments that you may receive, for example redundancy payments, property or money left in a will);
•  stop using your bank, building society, credit card and similar accounts straightaway;
• not obtain credit of £500 or more from any person without first disclosing the fact that you are bankrupt; 
• Not make payments direct to your creditors.

You may also have to go to court and explain why you are in debt. If you do not co-operate, you could be arrested.

*Your books and papers will normally be destroyed after your trustee has finished with them. However, you can have them back, provided they have not already been destroyed, if the court annuls your bankrupsy.

What effect will Bankrupsy have on you and your credit rating?

Your bankrupsy will be registered with credit reference agencies and will remain on your file for a minimum of six years. After this time you may still have to declare your previous history, particularly when applying for a mortgage.

In relation to your creditors

If you are made bankrupt, you must not make payments direct to creditors. Creditors to whom you owe money when you are made bankrupt make a claim to your trustee (that is, either the Official Receiver or an insolvency practitioner). They should not ask you directly for payment; if you receive any requests, pass them immediately to your trustee to deal with and tell the creditor that you are bankrupt. There are some very limited exceptions to this non-payment rule. The main ones are: 

• Secured creditors, such as creditors who have a mortgage or charge on your home Note: If mortgage payments are not made, the lender may sell your home.
• Non-provable debts, such as court fines and other obligations arising under an order made in family proceedings or under a maintenance assessment made under the Child Support Act 1991. Non-provable debts are not included in the bankrupsy 
  proceedings and you are still responsible for paying off such debts; and 
• Benefit overpayments, where the Department for Work and Pensions (DWP) can recover any benefit overpayments from any further benefits you receive.
• Student loans, since 1 September 2004 all outstanding student loans cannot be claimed in bankrupsy. They remain the responsibility of the (former) student to repay within the terms of the loan arrangement.
• If you were made bankrupt before 1 September 2004 you may still have to repay your student loan. Clarification should be requested from the Official Receiver who is dealing with your affairs. 

Suppliers of services to your home (gas, electricity, water and telephone) may not demand from you payment of bills in your name which are unpaid at the date of the bankrupsy order. But they may ask you for a deposit towards payment for further supplies or could arrange for the accounts to be transferred into the name of your spouse or partner. You must pay continuing commitments such as rent (if you rent your home), together with any debts you incur after the bankrupsy.

Payment to creditors in Bankrupsy

The Official Receiver will tell your creditors that you are bankrupt. He or she may either act as the trustee or may arrange a meeting of creditors for them to choose an insolvency practitioner to be the trustee. This happens if you appear to have significant assets. You may have to go to this (or any other) meeting of your creditors.

The trustee will tell the creditors how much money will be shared out in the bankrupsy. Creditors then have to make their formal claims. The costs of the bankrupsy proceedings are paid first from the money that is available. The costs include fees that the Official Receiver or the insolvency practitioner charge for administering your case. 

At least part of the claims from your employees (if any) may be preferential and are paid next, along with any other preferential debts. Finally, other creditors are paid, together with interest on all debts, as far as there are funds available from the sale of your assets. If there is a surplus, it will be returned to you. You would then be able to apply to the court to have your bankrupsy ‘annulled’ (cancelled).

When your trustee makes a payment to your creditors, he may place an advertisement about your bankrupsy in a newspaper asking creditors to submit their claims. Depending on how long it takes your trustee to deal with your assets, this advertisement may appear several years after the bankrupsy order.

Your assets in Bankrupsy

You will no longer control your assets.

You can keep the following items unless their individual value is more than the cost of a reasonable replacement:

• Tools, books, vehicles and other items of equipment which you need to use personally in your employment, business or vocation; 
• Clothing, bedding, furniture, household equipment and other basic items you and your family need in the home. 

All these items must be disclosed to the Official Receiver who will then decide whether you can keep them.

The Official Receiver/trustee will take control of all your other assets on the making of the bankrupsy order. He or she, or any insolvency practitioner who is appointed as trustee, will dispose of them and use the money to pay the fees, costs and expenses of the bankrupsy and then your creditors. If appointed, the insolvency practitoner’s fees for acting a trustee are also paid from the money raised by selling your assets.

The trustee may apply to the court for an order restoring property to him or her if you disposed of it in a way which was unfair to your creditors (for example, if before bankrupsy you had transferred property to a relative for less than its worth). The trustee may claim property which you obtain or which passes to you (for example, under a will) while you are bankrupt.

A student loan made before or after the start of a student's bankrupsy is not regarded as an asset that the trustee may claim, if a balance of the loan remains payable.

If you have made a claim against another person through court proceedings, or you think you may have a claim (a right of action) against another person, the claim may be an asset in the bankrupsy.

What happens to your home in Bankrupsy?

If you own your home, whether freehold or leasehold, solely or jointly, mortgaged or otherwise, your interest in the home will form part of your estate which will be dealt with by your trustee. The home may have to be sold to go towards paying your debts.

If your husband, wife or children are living with you, it may be possible for the sale in the bankrupsy to be put off until after the end of the first year of your bankrupsy. This gives time for other housing arrangements to be made. Your husband, wife, partner, a relative or friend may be able to buy your interest in your home from the trustee. This may be so even if that interest is very small, worth nothing or you owe more on the house than it is currently worth. Such a purchase would prevent a sale of the property by the trustee at a future date. Your spouse or any other interested party should be encouraged to take legal advice about the home as soon as possible.

If the trustee cannot, for the time being, sell your home, he or she may obtain a charging order on your interest in it, but only if that interest is worth more than £1,000. If a charging order is obtained, your interest in the property will be returned to you, but the legal charge over your interest will remain. The amount covered by the legal charge will be the total value of your interest in the property and this sum must be paid from your share of the proceeds when you sell the property.

Until your interest in the home is sold, or until the trustee obtains a charging order over it, that interest will continue to belong to the trustee but only for a certain period, usually 3 years, and will include any increase in its value. Therefore, the benefit of any increase in value will go to the trustee to pay your debts, even if the home is sold some time after you have been discharged from bankrupsy: the increase in the value will not be yours.

If, after a certain time, usually 3 years, your trustee has not sold or obtained a charge over your interest in the property, or applied for an order of possession or obtained a charging order against the property, or you have not come to any arrangement with your trustee about that interest, it may be returned to you.

What is a bankrupsy restriction notice?

A bankrupsy restriction notice is an entry at the Land Registry against a property that is solely owned by a bankrupt. A restriction is automatically placed when a bankrupsy order is made. It puts on record that the bankrupt is no longer the legal owner of the property and does not have the ability to sell the property or enter into any other dealings in connection with the property - only the trustee can do this.

The restriction will not be removed until the trustee has been paid his legal and beneficial interest in the property. If your interest in the property is returned to you (see below - What happens if no-one buys the beneficial interest?), the trustee will notify the Chief Land Registrar that the property is now yours again.

What is a Form J restriction?

A Form J restriction is an entry at the Land Registry, made on the application of the trustee, against a property that is jointly owned by a bankrupt. It is a record of the trustee's beneficial interest in the property. It means that the Land Registry must notify the trustee of any dealings in connection with the property.

A Form J restriction is different from a charge, which relates to a claim for a specific amount of money.

A bankrupt's legal interest in a jointly owned property does not transfer to the trustee. So a bankrupt and the co-owner can still sell the property, but the trustee must be paid the value of the beneficial interest from the sale proceeds.

The Form J restriction will only be removed when the trustee has been paid his beneficial interest in the property.

If the property is sold, the trustee will make a claim against the property.

What happens in Bankrupsy if I rent my home?

If you fail to keep to the terms of your tenancy agreement, for example by not paying your rent, the landlord may take action against you. The official receiver or trustee will normally have no interest in your home to sell for the benefit of creditors. In most cases the official receiver or trustee will need to tell your landlord that you are bankrupt. We suggest you seek legal advice on what may happen under your tenancy.

What happens to your pension in Bankrupsy?

A trustee cannot usually claim a pension as an asset if your bankrupsy petition was presented on or after 29 May 2000, as long as the pension scheme has been approved by the Inland Revenue.

For petitions presented before 29 May 2000, trustees can claim some kinds of pensions. A separate publication called “What will happen to my pension?” is available from your local Official Receiver’s office or The Insolvency Service Publications Order Line.

If you are receiving a pension or become entitled to do so before you are discharged, the pension is included as income for the purposes of an income payments order (IPO).

To find out more information please see the following publication: What will happen to my pension? Insolvency Service

What happens to your life assurance policy in Bankrupsy?

Generally, your trustee will be able to claim any interest that you have in a life assurance policy. The trustee may be entitled to sell or surrender the policy and collect any proceeds on behalf of your creditors. If the life assurance policy is held in joint names, for instance with your husband or wife, that other person is likely to have an interest in the policy and should contact the trustee immediately to discuss how their interest in the policy should be dealt with. 

You may want the policy to be kept going. Ask your trustee: it may be possible for your interest to be transferred for an amount equivalent to the present value of that interest.

If the life assurance policy has been legally charged to any person, for instance an endowment policy used as security for the mortgage on your home, the rights of the secured creditor will not be affected by the making of the bankrupsy order. But any remaining value in the policy may belong to your trustee.

Work-related registrations, licences and permissions

Any registration, licence or permission you hold in connection with your work or trade might be affected by the making of the bankrupsy order. You should inform the person who issued the registration or authority of your bankrupsy to establish if it will remain in force or will be cancelled or withdrawn. Any value attaching to these items may belong to the trustee. In considering this issue you should disregard items of a personal nature such as a driving licence.

What happens to your business in Bankrupsy?

If you are self-employed, your business is normally closed down and any employees are dismissed. Any business assets will be claimed by the trustee unless they are exempt and you will have to give the Official Receiver all your accounting records. You are still responsible for completing all tax and VAT returns.  Your employees may be able to make a claim to the National Insurance Fund for outstanding wages and holiday pay, payment in lieu of notice, and redundancy. Employees can claim in the bankrupsy for any money owed that is not paid by the National Insurance Fund. 

For further details, you should contact the Redundancy Payments Service on 0845 145 0004. 

There is nothing to prevent a bankrupt from being self-employed. So you can start to trade again, subject to restrictions. You will be responsible for keeping accounting records for this business and for dealing with the tax and VAT requirements for the new business. You will need to register again for VAT if you meet the registration requirements. You should not continue to use your pre-bankrupsy VAT registration number.

What happens to your wages in Bankrupsy?

Your trustee may apply to court for an income payments order (IPO), which requires you to make contributions towards the bankrupsy debts from your income. The court will not make an IPO if it would leave you without enough income to meet the reasonable domestic needs of you and your family. If you have an increase or decrease in income, the IPO can be changed. 

IPO payments continue for a maximum of 3 years from the date the order is made by the court and may continue after you have been discharged from your bankrupsy. Or you may enter into a written agreement with your trustee, called an income payments agreement (IPA), to pay a certain amount of your income to the trustee for an agreed period, which cannot be longer than 3 years. There are no fixed guidelines on IPOs or IPAs - each case is assessed individually.

Bankrupsy restrictions orders and undertakings

If, during his/her enquiries into your affairs, the Official Receiver decides that you have been dishonest either before or during the bankrupsy or that you are otherwise to blame for your position, he/she may apply to the court for a bankrupsy restrictions order. The court may make an order against you for between 2 and 15 years and this order will mean that you continue to be subject to the restrictions of bankrupsy. You may give a bankrupsy restrictions undertaking which will have the same effect as an order, but will mean that the matter does not go to court.

Debts incurred after you have been made bankrupt

Bankrupsy deals with your debts at the date of the bankrupsy order. After that date you should manage your finances more carefully. If you incur new debts this could result in:  

• A further bankrupsy order; 
• Prosecution if, when you incurred the debts, you did not disclose that you were bankrupt.  

Alternatives to Bankrupsy

It may be better for both you and your creditors to use one of these alternative procedures instead of bankrupsy.

An informal arrangement or “family arrangement”

If you know that you cannot pay all your debts, you could consider writing to your individual creditors to see if you can reach some compromise. Include a timetable of when you will repay them. The disadvantage with an informal arrangement is that it is not legally binding so your creditors could ignore it later and ask you to pay in full.

Administration orders

If one or more of your creditors has obtained a court judgment against you, the county court may make an administration order. Administration is a court-based procedure whereby you make regular payments to the court to pay towards what you owe your creditors. Your total debts must not be more than £5,000 and you will need enough regular income to make weekly or monthly repayments. You do not have to pay a fee for an administration order but the court will take a small percentage from the money you pay towards its costs. If you do not pay regularly, the order could be cancelled and you may become subject to the same restrictions as someone who is bankrupt. If your circumstances change and you cannot pay as ordered, you can apply to the court to change the order. The court which made the order will tell you what to do. Details of administration orders are available at your local county court.

Individual voluntary arrangements

This is a formal version an Informal Arrangement. An individual voluntary arrangement begins with a formal proposal to your creditors to pay part or all of your debts. You need to apply to the court and you must be helped by an insolvency practitioner. Any agreement reached with your creditors will be binding on them.

What are the main changes of the new Enterprise Act 2002?

The three main changes are

• A limit of three years may be placed on the Trustee’s rights to realise equity in your home ( this was previously open ended)
• Harsher penalties imposed on those who are considered to have brought about their bankrupsy through reckless or irresponsible behaviour. Restrictions after bankrupsy could last for a further two to fifteen years.
• In certain circumstances you may be discharged from bankrupsy after one year (previously the minimum was two year’s)

What publications can I get related to Bankrupsy?

Publications are also available on website www.insolvency.gov.uk

What are the advantages of going Bankrupt?

There are a number of advantages to bankrupsy including:

• It can remove the uncertainty and anxiety caused by negotiating with a large number of  creditors simultaneously;
• There can be a sense of relief for the debtor;
• The client usually pays less; if any payments are made they will take the form of one  payment to the trustee rather than individual payments to creditors;
• It can be a fresh start: the process is intended to rehabilitate the debtor;
• Creditors have to accept the situation and contact with the debtor will slop; most creditors will be unable to take further action against the debtor.
• The process is certain;
• After discharge most debts are written off and can no longer be pursued by creditors.

What are the disadvantages of going Bankrupt?

However, there are also many disadvantages, including:

• The debtor will almost certainly lose any assets of value that can be sold off unless they are exempt (although even then the debtor may have to accept a replacement of lower value) 
• If there is equity in the family home (i.e., it is worth more than the mortgage(s)) the trustee will want to release the debtor’s share of the equity. This may lead to the home being sold (although this cannot happen if the value of the  debtor’s share does not exceed £1,000)
• If the debtor owns a business and employs people, or the business has a value, the employees may have to be dismissed and the business sold;
• If the debtor has a mortgage or rent arrears the home will still he at risk; bankrupsy does not prevent a secured lender from taking possession proceedings; a landlord may be able to enforce a suspended possession order it the arrears are not paid or find some ground other than rent arrears to start possession proceedings — eg, persistent delay in paying rent.
• The debtor cannot obtain credit of more than £500 without disclosing her/his status where s/he is an undischarged bankrupt or subject to a BRO or bankrupsy restriction undertaking (BRU) and s/he may find it more difficult to open a hank account.
• The process is very expensive; a debtor who wishes to pay off the debts in order to preserve an asset — eg, the family home will have to pay the costs as well;
• The debtor must allow her/his financial affairs to be scrutinised by officials who may take criminal action or apply for a BRO/BRU if irregularities are found.
• The debtor may be barred from certain public offices or may be unable to practice certain professions eg, accountant, solicitor;
• The debtor’s credit rating will continue to be adversely affected after discharge and this will probably make running a business or buying a home in future very difficult;
• The debtor may feel judged and humiliated; there is still a stigma attached to bankrupsy and this will be reinforced in cases where a BRO/BRU is made;
• While undischarged or subject to a BRO, the debtor cannot be a company director (without the leave of the court) and cannot trade under any name other than the one used at the date of the bankrupsy order without disclosing the name s/he went bankrupt under to all persons with whom s/he does business;
• The names of people who are made bankrupt are published in the London Gazette and also in the local press; BROs/BRUs may also attract local publicity; friends and neighbours may find out about the debtor’s financial difficulties and, where a BRO is made, that s/he has been found to have acted irresponsibly in relation to her/his financial affairs;
• Not all debts will be written off at the end of bankrupsy — eg, fines, maintenance/child support.
• Secured creditors are not affected by bankrupsy and can still enforce their security;
  Joint debts are not written off in the sense that creditors can still pursue the non-bankrupt co debtor -. If s/he is the debtor’s partner, the family will still be in financial difficulties.

What is a Statutory Demand?

A statutory demand is a document demanding that the client either pays the debt in full or in part in a manner acceptable to the creditor, which could be by instalments. Form 6.1 is used where there is no judgment; form 6.2 is used where there is a judgment.

The statutory demand does not have to be issued by the court or even seen by it at this stage. If the debtor does not comply with the statutory demand within 21 days, the creditor can issue a creditor’s petition and ask the court to make a bankrupsy order. A creditor does not need a judgment in order to be able to serve a statutory demand for the debt. However, without a judgment the creditor might find that the debtor is able to cha1lenge the existence of the debt (see below). A creditor who does have a judgment is not required to attempt to enforce it by means of execution against goods first of all; the creditor can serve a statutory demand instead.

Responding to a statutory demand

Although some creditors use statutory demands as a method of debt collection with no intention of making the debtor bankrupt, statutory demands should never be ignored (unless the debtor has decided s/he wants to go bankrupt). On receipt of a statutory demand, the person should consider the following options:

• Whether to apply for an administration order or propose an IVA;
• Making payment(s) either to clear the debt in full or reduce it below the £750 bankrupsy limit;
• Making an offer to pay the debt by instalments If the debt is subject to a judgment as well as trying to negotiate with the creditor, the debtor should apply to the court to vary the judgment to enable payment by instalments with a view to arranging this before the creditor can obtain a bankrupsy order; in appropriate circumstances, the client could apply for a time order.
• Offering a voluntary charge over her/his property as security for the debt.
• Applying to set aside the statutory demand within 18 days. 

Setting aside a statutory demand

If the statutory demand has been ‘set aside’ (i.e. cancelled) the creditor cannot apply for a bankrupsy order. The debtor can apply for the demand to be set aside on the grounds that:

• There is a substantial dispute about the money said to be owed — i.e., where there is a ‘genuine triable issue’; if the creditor has obtained a judgment, the court will not at this stage enquire into the validity of the debt.
• The debtor has a cross-claim against the creditor which equals or exceeds the amount of the debt;
• The creditor holds security which equals or exceeds in value the amount of the debt;
• On ‘other grounds’ — eg, the debt is statute-barred or the demand has not been signed.
• The application is made on form 6.4 supported by an affidavit in form 6.5. There is a £60 court fee but the client can apply for exemption or remission. The application will be put before a district judge. If s/he considers there are no grounds for the application, the district judge can dismiss it without a hearing. Otherwise, a hearing will be arranged at which the district judge will consider the application.
• The court will not set aside a statutory demand on the ground that the creditor has unreasonably refused an offer of payment or security, or even on the ground that the creditor has refused to consider such an offer. Nor will the court set aside a demand on the ground that it is for an excessive amount. In such a case, the debtor is supposed to pay the amount admitted to be due and only apply to set aside as to the amount in dispute. The court will not ‘do a deal’ with the client to set the statutory demand aside on condition that s/he makes a payment.
• If the application to set aside is dismissed, the creditor will be given leave to present her/his bankrupsy petition.

How do I petition for my own Bankrupsy? Form 6.27 Petition?

To petition for your own bankrupsy you will need to start with FORM 6.27 it can be down-loaded from the following link. http://www.insolvency.gov.uk/guidanceleaflets/dealingwithdebt/howtopetition.htm#3

COPY AND PASTE the link into your internet address bar and then register on that site.

First, you will need to complete the following forms. You can get the forms, free of charge, from a local court that deals with bankrupsy. You can also complete the forms on-line or print the forms off at The Insolvency Service's website at: www.insolvency.gov.uk

• The petition (Insolvency Rules 1986 form 6.27) - this form is your request to the Court for you to be made bankrupt and includes the reasons for your request.
• The statement of affairs (Insolvency Rules 1986 form 6.28) - this form shows all your assets (anything that belongs to you that may be used to pay your debts) and all your debts, including the names and addresses of the creditors and the amount you owe each one. The form contains a declaration of insolvency that you will need to swear on oath before an officer of the court or a solicitor. You may have to pay an extra fee for this.

You can complete both of the above forms online via The Insolvency Service's Online Forms Service. This is an interactive internet service which can be accessed at a time and location that is convenient to you via The Insolvency Service's website, www.insolvency.gov.uk. Just follow the link "Do It Online" from the homepage.

The Online Forms Service is easy to use and provides assistance to allow you to complete the forms on your own. There is also a dedicated enquiry line telephone number and e-mail address if you require additional guidance in completing the forms. The Online Forms Service allows you to save and retrieve partially completed forms, with the ability to edit previously saved information. 

A secure database then captures the information you provide in the forms. This information is automatically deleted if you do not present your bankrupsy petition to the Court within six months, but if a bankrupsy order is made the information is made available to The Insolvency Service. This may reduce the need for the official receiver to ask you for additional information. 

Once you have completed the forms you will need to print them and take them to court.

If you do not use the Online Forms Service you should complete the petition and statement of affairs forms in capital letters, using black ink. Court staff can only advise you on the court procedure and give you the forms you need. They cannot give you legal advice.
If you are dealing with a county court, the court will need the completed forms and 2 copies of each before it can accept your petition for bankrupsy. If you are taking your petition to the High Court, you won't need any extra copies. When you have completed both forms, and printed the forms if you have used the Online Forms Service, signed and dated the bottom of every page, and have the fees ready, you can go to the court and ask for your petition to be dealt with.

NB: If you are, or were, running a business in partnership (even if there is no formal partnership agreement) and all the partners want to be made bankrupt, you will need different petition and statement of affairs forms. These are available from your local court.