Insolvency

Bankruptcy is a statutory process. There are both formal and informal procedures available as alternatives to bankruptcy. The informal processes centre upon agreeing a repayment plan directly with creditors. Such processes can be effective in some cases, but they do not offer the legal protections that are ingrained within the formal processes. The most prominent, legally binding alternative to Bankruptcy is an Individual Voluntary Arrangement (IVA) which is a debt restructuring plan that allows debts to be settled under the supervision of a licensed Insolvency Practitioner with the agreement of the individual’s creditors.

Yes, repossession is a last resort but unfortunately, the family home is often the core asset in a bankruptcy case. The law provides that once a year has passed since the making of a bankruptcy order, the rights of the creditors are paramount in all but exceptional circumstances. Engaging with the Trustee in Bankruptcy is key to avoiding eviction. We regularly enter into negotiations on behalf of non-bankrupt family members so that we can safeguard the family home.

A transfer at undervalue is a term which appears in the Insolvency (Northern Ireland) Order 1989 to describe a situation whereby an individual or company that is insolvent gives away or transfers one of their assets for less than it is worth. This impacts the amount of money which is available for the creditors that are owed money by the company or individual. The legislation enables such transactions to be scrutinised by the Court and if appropriate, to set aside the transaction to put the parties back in the position that they would have been in if the transfer had not taken place.

The Insolvency (Northern Ireland) Order 1989 provides that the minimum amount payable to a creditor before a Winding-Up Petition can be issued is £750.00. However, it should be noted that the cost of Winding-up a company exceed £750.00 and so we work with our clients to carry out a cost/benefit before embarking on any winding-up process.

As a general rule, a company is a distinct legal entity and the directors do not have personal liability for the company’s debts. However, a director has a number of statutory duties, and it is possible, that breaching these duties and/or acting recklessly or dishonestly when conducting company business can lead to personal liability. For example, if a director fails to take steps to minimise the potential loss to creditors when they know or ought to know that a company is insolvent, a Court can determine that they must make a contribution to the debts of the company as they have guilty of wrongful trading.

Also, company directors will often be required to sign personal guarantees for company debts. Executing such guarantees means that a creditor can take action against the director if the company fails to pay the debt.

A court procedure that is used to overturn a bankruptcy order.  It typically involves paying all of the debts and expenses of the bankruptcy but can also be used to challenge any technical deficiencies in the original bankruptcy order.

The term used in insolvency law to describe anyone that is connected to the bankrupt including spouses, civil partners, children, relatives, business partners, employees or an employer.

A court order that extends the restrictions of bankruptcy beyond 1 year.  It is used in exceptional cases were the bankrupt has engaged in dishonest acts or reckless behaviour which in turn increased the amount due to his creditors.  The duration of the order is determined by the court based on the severity of the bankrupt’s conduct but in extreme cases it can last for up to 15 years.  

Freedom from the restrictions of bankruptcy.  These restrictions include the prohibition on acting as a director of a limited company or obtaining credit over £500 or carrying on business under a new trading name.  An individual is automatically discharged from bankruptcy on the one year anniversary of the day the original bankruptcy order was made. Despite common misconceptions, discharge does not mean that the bankruptcy process is complete, the administration of the estate will continue until all assets have been realised and a final report has been issued to creditors.  

The amount paid to creditors in settlement of their debts as part of either an Individual Voluntary Arrangement or a bankruptcy.  It is described in monetary terms rather than percentages for example, 25p in the £.

An individual that is appointed by a bank or building society, in a professional capacity, to take control of a property subject to a mortgage or charge as a result of prolonged default by the individual borrower.  This is not technically an insolvency process and does not usually require any court proceedings to be issued.  The receiver only deals with the property named in the charge deed and does not have any claim to the individual’s other assets or personal belongings.  The individual that has defaulted on the loan repayments will lose control of the property in question but will not necessarily be made bankrupt.

A court order requiring a bankrupt to make contributions to his/her bankruptcy from disposable income or excess salary.  The court will consider the bankrupt’s family circumstances and household bills and expenditure before determining if an Income Payments Order is appropriate. The amount paid will vary from case to case and will depend on how much the bankrupt can reasonably afford.  The payments are typically made on a monthly basis and the order lasts for 3 years unless there is a change in the bankrupt’s employment that would impact the bankrupt’s ability to make the payments.

A legally binding debt management and restructuring scheme which operates as an alternative to bankruptcy.  A debtor makes a proposal to his creditors.  A vote is taken at a meeting of creditors to ascertain if the proposal is acceptable.  Voting rights are based on the amount owed to each creditor.  If the proposal is to be successful, 75% of the value of creditors must vote in favour of it.

A professional that is licensed by a recognised regulatory body, such as the Law Society of Northern Ireland or  Chartered Accountants Ireland, to administer insolvency procedures such as the administration of a bankrupt’s estate or an Individual Voluntary Arrangement.  This is a distinct and specialist role that goes beyond the ordinary work of a solicitor or an accountant. 

A court order which puts any legal action or enforcement proceedings on hold while a proposal for an Individual Voluntary Arrangement is being considered by creditors.

The title given to the Insolvency Practitioner that is appointed to assist a debtor in preparing a proposal for an Individual Voluntary Arrangement and presenting the proposal to his creditors for consideration.  The Nominee provides an independent, expert opinion on whether the proposal provides a fair and reasonable means of restructuring the individual’s debts taking into account the prospects of success and the rights of creditors.

A senior civil servant and officer of the court responsible for the administration of bankruptcies in Northern Ireland as part of the activities of the Department for the Economy.

A standardised form which is completed by creditor setting out the amount owed to them as part of their claim in either a bankruptcy or an Individual Voluntary Arrangement.  It is submitted to the appointed Insolvency Practitioner by the creditor with any supporting documents, contracts or invoices attached.

Written consent that allows a creditor to appoint a representative to attend and vote at a meeting of creditors on his/her behalf

The requirement for a bankrupt to attend a public hearing to be questioned by the Official Receiver on any issue that arises during the administration of his/her bankruptcy.

A court procedure that brings a bankruptcy to an immediate end.  It is similar to an annulment but is a wider legal remedy as the court has the power to ‘review, rescind or vary’ any order.  The court can examine wider issues of fairness, public interest and cost effectiveness.  It does not challenge or undermine the original bankruptcy order.

A detailed questionnaire which must be completed at the commencement of a bankruptcy or as part of a debtor’s proposal for an Individual Voluntary Arrangement.  The information contained in the statement sets out essential biographical and financial information and provides a fundamental record of the individual’s assets and liabilities. 

The title given to the Insolvency Practitioner that is responsible for monitoring and enforcing the implementation of an Individual Voluntary Arrangement.

The formal legal title given to the Insolvency Practitioner that is appointed by the Department for the Economy to handle the day-to-day administration of the bankrupt’s estate.  A Trustee in Bankruptcy has a wide range of legal powers and is responsible for realising the bankrupt’s assets for the benefit of creditors.