Straightforward Guide To Bankruptcy, Insolvency And The Law

Sixth Edition

• Editore: Straightforward Publishing Digital
• Anno: 2012
• ISBN:
  9781847162465
• Argomento: Droit
• Categoria: Droit des faillites et de l'insolvabilité

In the last few years the whole process of bankruptcy has moved from the original position, where a person was bankrupt for a number of years to a position where the process has been streamlined - with the period of bankruptcy shortened to one year. In addition, debt relief orders are being introduced which give greater relief to the bankrupt. The reader of this brief but concise book will gain a much clearer idea of the routes through the process of personal bankruptcy and company insolvency.

Chapter One

The Personnel Involved in Bankruptcy

 

The Insolvency Service

The Insolvency Service operates under a statutory framework-mainly the Insolvency Acts 1986 and 2000, the Company Directors Disqualifications Act 1986 and the Employment Rights Act 1996. There are a network of 38 Official Receiver offices throughout England and Wales. The Enforcement Directorate and headquarters are in London, Birmingham, Manchester and Edinburgh.

What the Insolvency Service does

The Insolvency Service:

• administers and investigates the affairs of bankrupts, of companies and partnerships wound up by the court, and establishes why they became solvent;

• acts as trustee/liquidator where no private sector insolvency practitioner is appointed;

• acts as nominee and supervisor in fast-track individual voluntary arrangements;

• takes forward reports of bankrupts’ and directors misconduct;

• deals with the disqualification of unfit directors in all corporate failures;

• deals with bankruptcy restriction orders and undertakings;

• authorises and regulates the insolvency profession;

• assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay its employees;

• provides banking and investment services for bankruptcy and liquidation estate funds;

• advises BIS ministers and other government departments and agencies on insolvency, redundancy and related issues;

• provides information to the public on insolvency and redundancy matters via its helpline 0845 602 9848, website, www.insolvency.gov.uk, Leaflets and Redundancy Payments Helpline.

The Insolvency Service also carries out investigations into companies.

If you are thinking about going bankrupt you should contact the Insolvency Service on their helpline-addresses also contained in the back of this book.

The Official Receiver

The Official Receiver is a civil servant in the Insolvency Service and an Officer of the Court. He or she will be notified by the court of the bankruptcy or winding up order. He will then be responsible through his staff for administering the initial stage, at least, of the insolvency case. This stage includes collecting and protecting any assets and investigating the causes of the bankruptcy or winding up.

The Official Receiver’s staff will contact you, either immediately if action is urgently needed or within 2 days of receiving an insolvency order or bankruptcy order. Usually they will arrange an appointment for you to attend the Official Receiver’s office for an interview, normally within ten working days of receiving the order from the court. He or she will then act as your trustee in bankruptcy unless the court appoints an insolvency practitioner to take this role. Assuming that it is the Official Receiver who will be acting as your trustee, he or she will be responsible for looking after your financial affairs during your bankruptcy and also your financial affairs prior to you being made bankrupt.

If the Official receiver does not require you to attend an interview you will be sent a questionnaire to fill in and return. See chapter three for the detailed process of bankruptcy and the steps involved.

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ALTERNATIVES TO BANKRUPTCY

Chapter 2

Debt Relief Orders

Before considering going down the road of bankruptcy, there are a number of viable alternatives, one of which may suit you. These alternatives are based on a person being solvent and having enough surplus income to pay off debts, or a proportion of debts, over a specified period. In most cases, with the exceptions of Debt Management Plans, the alternatives are ratified by the courts, administered by third parties and provide relief from creditors. In addition, any surplus debts after the expiry of the order are then written off.

Debt Management Plans are somewhat different and more personal, are not legal although can be administered by a third party. We will be discussing these at the end of this chapter.

Debt Relief Orders

What is a debt Relief Order?

A debt relief order, which came into force in April 2009, is an order you can apply for if you can’t afford to pay off your debts. It is granted by the Insolvency Service and is a cheaper option than going bankrupt.

You must have debts of less than £15,000 and a low income to apply for a debt relief order. It usually lasts for one year and, during that time, none of the people that you owe money to (creditors) will be able to take action against you to get their money back. At the end of the year you will be free of all the debts listed in the order. You can’t apply for a debt relief order if you:

• own things of value or have savings of over £300

• Own a vehicle worth more than £1,000

• Have a private pension fund worth over £300

To apply for a debt relief order, you will need to contact an authorised advisor who will check whether or not you meet the specific conditions and then applies for the order on your behalf. Details of authorised advisors can be obtained from the Insolvency Service, the Law Society or from a Citizens Advice Bureau. The order will cost you £90 but you can pay this in instalments over six-months.

Who can apply for a debt relief order?

You can only apply for a debt relief order if you meet certain conditions. These are when:

• You have qualifying debts of £15,000 or over. These debts must be of a certain type

• You have disposable income of less than £150 per month after expenses (normal expenses). When you work out this figure you must take into account all of the money that you have coming into your household. This includes

salary and wages, any benefits, pension, contributions from other household members and any rental income.

• The assets that you own and any savings are worth less than £300. Your motor vehicle must be worth less than £1,000 unless it has been specially adapted because you have a physical disability.

• In the last three years you must have lived, had a property or carried on a business in England or Wales.

Type of debts included in a debt relief order

As explained, only certain types of debts can be included in a debt relief order. These are termed qualifying debts and include:

• Credit cards

• Overdrafts

• Loans

• Rent

• Utilities

• Telephone

• Council tax

• Benefit overpayments

• Social fund loans

• Hire purchase or conditional sale agreements

• Buy now-pay later agreements

Certain types of loans cannot be included such as:

• Court fines and confiscation orders-basically fines relating to criminal activity

• Child support and maintenance

• Student loans

Your assets

Assets are the things of value that you own. As explained above, if you own assets worth more than £300, or if you have a motor vehicle worth more than £1,000 you won’t be able to apply for a debt relief order. Examples of assets that you may own include savings, vehicles, shares, antiques, and property. This is not an exhaustive list. Essentially, anything with a value can be counted as an asset.

In relation to property, if you own a property it is very unlikely that you can apply for a Debt Relief Order. The fact that you may have a mortgage on it will not matter.

If you have not reached retirement age, but have a private or occupational pension fund, then the value of the fund counts towards the £300 limit. If you have retired and are receiving payments from a pension, then this will be regarded as income rather than an asset.

When working out what is an asset, and the value of an asset, there are some items that you don’t have to take into account. These include:

• Household equipment such as bedding clothing and furniture, i.e. essential items.

• Tools, books and any other item of equipment that you may use in your business

• A car which has been specially adapted because you have a physical disability and which you need to carry out your everyday activities.

• A motor vehicle worth less than £1,000.

Those ineligible for a debt relief order

A person cannot get a debt relief order if the following applies:

• Person currently bankrupt

• You have an IVA (Individual Voluntary Arrangement) or are applying for an IVA.

• Creditors have applied to make you bankrupt but the hearing hasn’t yet taken place. You might still be able to apply for a debt relief order if your creditors agree.

• You have been given a bankruptcy restrictions order or undertaking.

• You have petitioned for bankruptcy but your petition has not yet been dealt with.

• You have had a Debt Relief Order in the last six years.

• You have been given a debt relief restriction order or undertaking.

Applying for a Debt Relief Order

Debt relief orders are administered by the Official Receiver through the Insolvency Service. However, you can only apply for a debt relief order through a third party or intermediary and not through the Insolvency Service Direct. An intermediary is usually a skilled debt advisor who has been permission to proceed with the advice and paperwork. Intermediaries can be found by going to the Citizens Advice Service website www.Citizensadvice.org.uk. You can also find intermediaries through contacting the Insolvency Service www.insolvency.gov.uk

As mentioned above the cost of applying for a debt relief order is £90, which must be paid in cash at a payzone outlet. A list of these outlets can be found at www.payzone.co.uk. The £90 can be paid in six-monthly instalments. However, the Official receiver won’t consider an application until the fee has been paid in full. The fee is non-refundable. It is an offence to give false or misleading statements in your application. Once the debt relief order has been approved then you shouldn’t pay any of ...