How to Defend a Bankruptcy Petition

In Bankruptcy, the trustee (insolvency practitioner) performs a role similar to that of an administrator or liquidator in the insolvency of a limited company. Regardless of the procedure, the insolvency practitioner's (IP) primary responsibility is to sell assets to pay creditors. They can seize anything, except the tools of your trade.

If you cannot pay your debts, you may request a court to declare you as Bankrupt. You must submit a Statement of Affairs, which details the debts and explains your inability to pay. The application fee for Bankruptcy amounts to £680. Send the application along with a list of your assets and liabilities to an adjudicator at the government's Insolvency Service.. The adjudicator will assess the information and determine if you should be declared Bankrupt. Although creditors have the option to object, they rarely do. Court fines, student loans, and child maintenance payments will still be your responsibility. However, most of your debts will be discharged if you have no surplus income after your discharge, and creditors will not be able to pursue you.

Arguably, the biggest stigma associated with Bankruptcy is the fear of losing the family home; however, this can be avoided in most cases. In the first year, the courts won't allow a trustee to take the property even if they really want to. Nevertheless, after 12 months, creditors' interests prevail, enabling the trustee to take steps towards seizing and selling your home if there's significant equity in the property. To do this, they must first instruct lawyers to draft an order and make an application to a court. Consequently, litigation costs on both sides will escalate if the Bankrupt resists and contests. As a result, the trustee will be left with a sizeable legal bill, even if they do eventually get the property.

If 1 owner becomes Bankrupt, but the couple want to keep the house; the other party must buy back the 50% share now controlled by the trustee. Even if they refuse to buy the share, the trustee can force the sale of the property after 12 months. If a Bankrupt really wants to keep their home and there's significant equity in the property; they can arrange for a 3rd-party payment to the trustee for a corresponding amount.

For example: if a trustee who wants your home says: “I think there’s £50,000 equity in the property.” Your response should be to get the house valued whereby your beneficial share is worth £30,000. Then, offer the trustee a cash sum of £24,000 (payable in 12 monthly installments of £2,000) to disclaim their interest in the property.

After declaring Bankruptcy, the Official Receiver will summon you for an interview. The Official Receiver is a court-appointed official from the Insolvency Service. During the interview, they will ask you to fill out a questionnaire containing information about your:

• Assets
• Liabilities
• Income
• Employment
• Bank account(s)
• Life insurance.

The official receiver will appoint an insolvency practitioner to act as trustee if you have valuable assets. The insolvency practitioner will sell your assets to pay the creditors you owe.

If your trustee believes you have surplus revenue, they can ask the court to make you pay up to 36 monthly payments into the Bankruptcy Estate via an Income Payments Order (IPO). Alternatively, you can voluntarily make these payments through an Income Payment Agreement (IPA).

Antecedent transactions (dealings that were harmful to the interest of creditors) that took place in the months prior to the Bankruptcy may be canceled and set aside by the trustee.