Under UK Insolvency Law, there are 3 ways you can become bankrupt:-

  • Creditor Petition to the Court – some is applying to make you bankrupt.
  • Debtor Petition to the Court, ie applying for your own bankruptcy – see DIY bankruptcy.
  • IVA Supervisor Petition to the Court in the case where the debtor has defaulted on the IVA and an alternative arrangement can’t be agreed.

Creditor’s Petition

For a bankruptcy petition to be presented to the Court, 3 conditions must be satisfied:

  • The debtor must usually live in England/Wales or be active in business in England or Wales.
  • The debt must be at least £5,000 to the creditor petitioning for bankruptcy.
  • The debtor must have no realistic ability to repay the debt, or be refusing to pay the debt. This is proven by the debt being served with a statutory demand, which has not been set aside or complied with; or by an unsatisfied baillif return.

Two or more creditors may jointly petition. Secured creditors may petition for the part of the debt that is not secured.

The creditor’s petition must state:

  • The amount owed, and if interest is owed, how it has been calculated and the justification for this.
  • That the debt is for a liquidated sum payable now or at a specified future date and that the debtors have no realistic chance of making payment on time.
  • That the debt is unsecured.

If the petition is based upon a Statutory Demand, then only that debt, plus interest accrued since the date of the demand was issued can be included.

If the petition is based upon an unsatisfied execution of a previous Court order then full details must be given, including the value of any sum raised by the Court’s sheriffs or Bailiffs.

Statement of Affairs Form

This is an official document which you will be required to complete, detailing your financial circumstances and assets. Assets are items of value that could be sold off to help repay your debts. The form requires detailed and accurate information, including valuation of assets which may not be known without seeking professional help.

The Court may refer the case to an Insolvency Practitioner if an IVA or a Debt Relief Order could be more appropriate course of action and needs consideration.

IVA Supervisors’ Petition

If you are currently within an IVA, your supervisor may petition the for your bankruptcy on the grounds that:

  • You supplied false or misleading information on which the arrangement is based.
  • You have failed to maintain the terms to the arrangement.

In this case, the IVA Supervisor can become the Trustee in the bankruptcy.

Issue Of The Bankruptcy Petition

A Bankruptcy Petition must be usually served in person. A Bankruptcy order may still be prevented but you must give at least 7 days notice of your intention to oppose it.

If the petition is based on the non-payment of a county court judgement, you must normally set aside that judgement to have a basis to oppose the bankruptcy petition.