Bankruptcy can be a very effective threat where the Judgment Debtor is a small business man or company director.
The debt needs to be more than £5000 before bankruptcy proceedings can be started.
The first step is to serve on the debtor a “Statutory Demand” which sets out why you say that money is due and details of the judgment obtained.
If the debt is not paid within 3 weeks of serving the Statutory Demand you can “Petition” the Court for a Bankruptcy Order to be made against the Debtor.
You must complete and send to the Debtor’s local Court a “Creditor’s Petition” and a Court fee of £280. In addition to the Court fee you will have to pay a deposit to the Court of £990 to cover the Official Receiver’s expenses in dealing with the Bankruptcy. This will be returned to you if no Bankruptcy order is made.
Bankruptcy is not a cheap option although if the Debtor avoids a Bankruptcy Order being made against him or her the deposit will be returned to you.
Once the Court receives the Creditor’s Petition, fee and proof of the Statutory Demand having been brought to the Debtor’s attention it will fix a date for the hearing of the bankruptcy Petition.
At the hearing the Court may:-
- Adjourn to another date to give the Debtor time to pay the debt;
- Make a Bankruptcy Order
- Approve a proposal for payment.
If a Bankruptcy Order is made the Court will appoint a “Trustee in Bankruptcy” who is a member of the Official Receiver’s office to deal with the Debtor’s affairs.
Once a Debtor has been made bankrupt no other Court proceedings can be started against him. His “Trustee” will collect together his assets and debts and will share out any surplus between his creditors.
If the debtor has other secured creditors they take priority over your debt.
Bankruptcy is not necessarily the right choice of enforcement where the Debtor has lots of other creditors since there may not be enough money to go round. Since being made bankrupt prevents a person from acting as a Company Director it can be a useful weapon if they are just ‘playing for time’.
If the debtor is a limited company the equivalent proceedings are for a ” Winding Up Petition”. Please contact us for further details.