How to Make Someone Bankrupt in the UK: A Step-by-Step Guide for Creditors
Making someone bankrupt is a serious legal action available to creditors when an individual is unable to pay their debts. It involves petitioning the court to initiate bankruptcy proceedings, leading to the debtor’s assets being used to repay creditors. Here’s a comprehensive guide on how to make someone bankrupt in the UK.
1. What Does Bankruptcy Mean?
Bankruptcy is a legal process where an individual’s assets are managed by a trustee to repay debts. Once declared bankrupt, the individual loses control of their assets and is subject to restrictions. Bankruptcy should be considered a last resort, as it has significant financial and reputational implications.
2. Who Can Make Someone Bankrupt?
Eligibility for Creditors
To petition for someone’s bankruptcy, creditors must meet the following conditions:
- Debt Threshold: The individual must owe you at least £5,000.
- Unpaid Debt: You must have taken reasonable steps to recover the debt, such as sending reminders or obtaining a court judgment.
- Proof of Insolvency: The debtor must be unable to pay their debts, as demonstrated by:
- Ignoring a Statutory Demand.
- Failing to comply with a County Court Judgment (CCJ) or High Court Judgment.
3. The Bankruptcy Process
Step 1: Issue a Statutory Demand
- A statutory demand is a formal written request for payment of the debt, giving the debtor 21 days to pay or agree to a repayment plan.
- If the debtor ignores or disputes the statutory demand, you can proceed to petition for bankruptcy.
Step 2: File a Bankruptcy Petition
- If the debt remains unpaid after the statutory demand, file a bankruptcy petition with the court.
- Complete Form 6.27 (bankruptcy petition) and Form 6.28 (statement of truth), detailing the debt and attempts to recover it.
Step 3: Pay the Fees
- Filing a bankruptcy petition incurs fees:
- Court fee: £302.
- Deposit for the Official Receiver: £1,500.
- Total cost: £1,802.
Step 4: Court Hearing
- The court will schedule a hearing to decide whether to issue a bankruptcy order.
- The debtor has the right to contest the petition if they dispute the debt or believe they are not insolvent.
Step 5: Bankruptcy Order
- If the court grants the bankruptcy order, the individual is officially declared bankrupt.
- An Official Receiver is appointed to manage the debtor’s assets and distribute proceeds to creditors.
4. Consequences of Bankruptcy
For the Debtor
- Asset Seizure: Valuable assets, such as property and vehicles, may be sold to repay creditors.
- Income Contributions: A portion of the debtor’s income may be used to settle debts.
- Credit Impact: Bankruptcy remains on their credit file for six years, making it difficult to obtain loans or credit.
- Restrictions: Debtors face restrictions on managing finances and running businesses during bankruptcy.
For Creditors
- Repayment: Creditors receive payments from the sale of the debtor’s assets, although this may not cover the full debt.
- Legal Action Halted: Other creditors cannot pursue separate legal actions against the debtor after the bankruptcy order.
5. Alternatives to Bankruptcy
Before petitioning for bankruptcy, consider alternative methods to recover your debt:
- Negotiation: Agree on a repayment plan with the debtor.
- County Court Judgment (CCJ): Obtain a court order to enforce debt repayment.
- Attachment of Earnings: Request deductions from the debtor’s income.
- Insolvency Agreements: Explore options like an Individual Voluntary Arrangement (IVA).
6. Risks and Considerations
- Costs: The high costs of filing a bankruptcy petition may outweigh potential recoveries, especially if the debtor has limited assets.
- Irreversible Action: Bankruptcy has severe consequences for the debtor, so it should only be pursued when other methods have failed.
- Legal Advice: Consult with a solicitor or insolvency professional before initiating the process.
How Fraser Bond Can Help
Navigating the bankruptcy process can be complex and time-consuming. Fraser Bond offers:
- Debt Recovery Assistance: Helping creditors explore options to recover debts efficiently.
- Insolvency Support: Guidance on filing statutory demands and bankruptcy petitions.
- Legal Expertise: Ensuring compliance with UK insolvency laws and protecting your interests.
Contact Fraser Bond today to discuss your debt recovery options and determine whether bankruptcy is the right course of action.
