The ongoing financial crisis continues to claim thousands of victims who are unable to manage their debts. Individual insolvency, governed by the Insolvency Act 1986, has been particularly prevalent peaking in 2011 at over 135,000.
Any individual that owes debts of at least £750 and is within the jurisdiction of a bankruptcy court can be made bankrupt. There are generally two options available when an individual is faced with debts that they cannot pay:
- Bankruptcy; or
- Voluntary arrangement.
Who May Apply?
The first step is the making of a petition to the court; this may be made by:
- One or more of the individual’s creditors;
- The individual;
- A supervisor of the individual
- In a criminal bankruptcy, the Official Petitioner.
Who Can be Made Bankrupt?
The rules laid down by the Insolvency Act apply widely and there are few exceptions. Included within their scope are foreigners, married women, Members of Parliament, minors and even those who lack capacity. Exceptions that do exist are diplomats and companies. Corporate insolvency is governed under other specific legislative provisions.
Bankruptcy Procedure
The procedure following presentation of a bankruptcy petition will depend on whether it was presented by the debtor himself or a creditor. In the case of a creditor the court must decide if:
- A debt is payable and has not been paid or secured or compounded for; or
- The debtor has no reasonable prospect of being able to pay the debt in question when it falls due.
Where these conditions are satisfied, the court may refuse to make a bankruptcy order if the debtor has made an offer to pay, secure or compound for the debt which has been unreasonably refused by the creditor or creditors.
If the relevant conditions are satisfied the court may make a bankruptcy order. This will mean that the bankrupt will be discharged after a maximum of twelve months and creditors will no longer be able to pursue debts.
Alternatively, in the case of a debtor’s petition the court may order a voluntary arrangement.
Individual Voluntary Arrangements (IVA)
An individual voluntary arrangement is a scheme by which the individual agrees to pay his debts over a particular period and his creditors agree to stop interest charges and actions to recover their debts during that period. The arrangement is proposed to the creditors and, if agreed, a supervisor is appointed to supervise its implementation.
Rollingsons has lawyers experienced in all types of insolvency matters; if you would like more information please contact James Crighton (jcrighton@rollingsons.co.uk) via e-mail or by telephone on 0207 611 4848.
