1. STATUTORY DEMANDS & BANKRUPTCY
INFORMATION FOR ADVISERS

2. What is a statutory demand?
A “Stat Demand” is formal a document demanding the client pay the debt in full or comes to an agreement with the creditor
Debt must be minimum £5,000
Shows creditors intention to commence bankruptcy proceedings
Does not have to be issued by a Court or seen by a Court
Form 6.1 if no CCJ
Form 6.2 if there is a CCJ
Stat Demand
Serving a Stat Demand is the most common way method used by creditors to satisfy the Court of a client’s inability to pay
The client needs to understand that this is the creditor telling the client that they are looking to make the client bankrupt
Myth
There doesn’t need to have been a County Court Judgment in place for a creditor to proceed with bankruptcy – though without a judgment it is possible for the client to challenge the existence of the debt.
A creditor who has a judgment is not required to attempt to enforce it, they can simply serve the statutory demand instead.
Ask How much needs to be owed for a statutory demand to be issued?

3. Important timescales 18 DAYS To set aside 21 DAYS
To pay or negotiate an offer
If no set-aside made, the creditor can ask the Court to issue a creditors petition and apply for a Bankruptcy order
Set Aside
Can be set-aside on the following grounds
Ask – can the group come up with some reasons where a stat demand can be set aside and what wouldn’t be a valid reason to ask for a set-aside
Proposing an IVA is not a valid reason to get the Stat Demand set aside. This would need to be done at the Bankruptcy hearing and the client would need to have something to show to the court that an IVA is an option – rather than simply mentioning IVA in the hope that the Judge will automatically stop the hearing.
Reason for
The debt is genuinely in dispute
You have a counterclaim against the creditor
The stat demand hasn’t be issued correctly
You owe less than £5k (min debt level for a bankruptcy petition)
The debt may be statute barred – out of time for the creditor to take court action
Reason against
The creditor has been unreasonable in refusing an offer of payment or considering such an offer
The balance of the debt is an excessive amount – the client would be expected to pay the amount they admitted to be due, then apply for a set aside on the disputed amount
The client promises they will pay if the Judge agrees to set the stat demand aside – Court’s won’t “do a deal”

4. THE SET ASIDE PROCESS
Complete forms 6.4 and 6.5 (there is no court fee attached to submitting a 6.4 and 6.5)
Submit to local county court
Hearing date will be set which client needs to attend
Application dismissed - If the application is dismissed this means the creditor can immediately apply to make the client bankrupt. Client would also possibly be liable to pay the court costs if it’s dismissed
Application successful - If the application is successful the Stat Demand will be cancelled (set-aside). However depending on the reason why it was set aside, the client may still need to continue negotiating with the creditor or they risk the creditor applying to make them bankrupt again.

5. BANKRUPTCY PETITION Debt must be over £5000
Petition must be served personally on the client
Must give a minimum of 5 working days notice before the hearing date
Client doesn’t have to pay the bankruptcy fee
Serving a bankruptcy petition
This could be done either by a representative of the creditor coming to the clients address and handing the petition over personally or sending it through the post by recorded delivery
Needs to give the client a minimum of 5 working days to allow them to prepare a defence against being made bankrupt
Ask
Why would the client not want to be made bankrupt?
Reasons – effect on job, assets at risk, risk to property or tenancy. Impact on ability to obtain credit in the future

6. AT COURT Judge hears evidence against bankruptcy being ordered
Bankruptcy Petition dismissed
Hearing suspended
Bankruptcy Order made
The Judge will hear argument from both sides as to why the bankruptcy should and shouldn’t be granted.
Petition Dismissed – ask the agents for possible reasons why a petition would be dismissed?
If the debt has been paid in full or the creditor is out of time for taking court action for the debt – if it is statute barred
Can also be dismissed if the Judge thinks that the creditor has been unreasonable in refusing offers of payments, such as payment by instalment and an offer to secure the debt against a property
Suspend the proceedings
If the Judge needs more information before making a decision, then he can suspend action for a short time and then reconvene the hearing. He may also allow time for funds to be raised if the client can provide evidence that he/she has the means to repay the debt
Make the bankruptcy order
Does what it says on the tin !!
If the Judge agrees with the Creditor
The debt hasn’t been repaid
No agreement has been made re payment being made or security offered up for the debt
Creditor hasn’t refused any reasonable offer
No defence against the order being made

7. BANKRUPTCY online £680 cost – no exemptions
Insolvency Enquiry line
Application approximately 1 hour
Adjudicator decision
Official Receiver
Ask – what are the 2 elements of the cost of making your self bankruptcy –
Application fee is £130
Bankruptcy deposit is £550
Total £680
No remission for low income applicants now
Application can’t be submitted until the full fee has been paid
Can pay fee in instalments – min £5 per time
Adjudicator
Makes decision usually within 28 days – currently about 2-3 days
Official Receiver
Officer of the Court who monitors the bankruptcy throughout
Usually sends a letter within 2 weeks of bankruptcy order being granted explaining what the client needs to know and what they must do now they are bankrupt
May be asked to attend an interview, provide more information on the debts, creditors, assets and income.

8. BANKRUPTCY restrictions
Can’t borrow more than £500 (without telling the lender that you are currently bankrupt )
Can’t act as a Director of Ltd Company
Can’t create, manage or promote a company
Can’t be an Insolvency Practitioner
Can’t manage a new business without telling people you do business with that you’re bankrupt
Criminal Offence to break restrictions

9. Are assets at risk? Assets not usually at risk:
Items needed for job, such as tools or a vehicle
Household items such as clothing, bedding or furniture
Assets at risk:
Cars over £1000 value (if the car is valued over £1000 the client may be asked to sell it, unless they can prove it’s essential)
Excessive value household items – latest all-singing TV !
Property with equity
Jewellery
If the car is valued over £1000 the client may be asked to sell it, unless they can prove it’s essential.
Car value is per Parkers or what a garage would sell the car for – not what they would buy it off the client for

10. Implications of bankruptcy
Bank account may be frozen
Any new bank account would need to be an Instant Access Cash Card account
Must notify the Official Receiver (OR) of any change in circumstances whilst in bankruptcy. (You have an obligation to notify the OR of any change in circs during bankruptcy. Failure to do this could be taken that you have failed to cooperate with the OR and there are implications of this; an Order to attend a public examination, an Arrest Warrant if you fail to attend the public examination, mail could be redirected or discharge from bankruptcy may be postponed and you could be subject to a Bankruptcy Restriction Order.)
Can affect certain jobs
Impacts on ability to get further credit including a mortgage
May be asked to pay an Income Payments Agreement/Order
Bank Account
Accounts may be frozen by the Bank whilst they speak to the Official Receiver.
If you have no debt with this bank, they may allow you to keep the account – but you won’t be allowed access to an overdraft
Change in Circs
You have an obligation to notify the OR of any change in circs during bankruptcy. Failure to do this could be taken that you have failed to cooperate with the OR and there are implications of this
An Order to attend a public examination
An Arrest Warrant if you fail to attend the public examination
Mail could be redirected
Discharge from bankruptcy may be postponed and you could be subject to a Bankruptcy Restriction Order

11. Jobs at risk from bankruptcy
Door Security
Solicitor/Lawyer/Chartered Accountant
Croupier
Baggage Handler
Trustee of a Charity MP
MOT Authorised Examiner
School Governor
Insurance Advisor
DRO Intermediary
Consumer Credit Licence Holder
Jobs
Door security – Security Industry Authority (SIA) prohibits a licence being held by anyone entering Bankruptcy/DRO
Solicitor – Solicitors Regulation Authority (SRA) and Law Society
Croupier – licence automatically lapses, but they may be able to re-apply to the Gambling Commission
Baggage Handler – security clearance required due to sensitive nature of the job – also impacts anyone who works airside at an airport
Trustee of a Charity – prohibited by the Charity Commission
MP – under Section 427 of the Insolvency Act it states that a debtor is incapable of being elected to or sitting or voting in the House of Commons and any committee thereof until the adjudication is annulled or discharged
MOT Authorised Examiner –
School Governor –
Insurance Advisor – regulated by the Prudential Regulation Authority/FCA
DRO Intermediary – Prohibited by the Insolvency Service rules and regulations
Consumer Credit Licence Holder -

12. Income payments agreement/order
INCOME PAYMENTS AGREEMENT (IPA)
A formal binding agreement between OR and client to make regular payments from his/her surplus income into the bankruptcy estate
Usually lasts for 3 years
Normally a minimum of £20pm
INCOME PAYMENTS ORDER (IPO)
If the client doesn’t agree to the IPA, the OR applies to the Court to make an Income Payments Order

13. Bankruptcy OFFENCES A Bankruptcy offence is a criminal offence
Giving away or selling property fraudulently within 5 years before bankruptcy
Getting credit of more than £500 without telling the Lender you’re bankrupt
Lying or failing to mention relevant information relating to your bankruptcy
Hiding assets from the Bankruptcy Trustee
Breaking any of the restrictions imposed in bankruptcy
Punishable by a fine and/or being sent to prison for up to 7 years

14. How long does it last?
It lasts until all the included debts have been repaid
If the Judge grants a Composition Order the repayments will only need to be made for 3 years
The Admin Order is recorded on the credit file for 6 years from the date the Order was made
Also added to the Register of Judgments, Orders & Fines for 6 years from the date the Order was made