What are bankruptcy petitions?

In England and Wales, a bankruptcy petition is a formal court application seeking to declare an individual bankrupt.

This legal process is governed by the Insolvency Act 1986 and associated insolvency rules. A bankruptcy petition can be presented by either the individual themselves (a debtor’s petition) or by one of their creditors (a creditor’s petition). The process and implications of each type vary, but both aim to address situations where an individual cannot repay their debts.

Issuing bankruptcy petitions for unpaid debts

Presenting a bankruptcy petition as a creditor in England and Wales involves a structured legal process, designed to recover debts from an individual who is unable to pay. This process is governed by the Insolvency Act 1986 and the Insolvency Rules 2016. Outlined below is an overview of the key steps involved:

Assessing the Debt

When issuing bankruptcy petitions, this first thing you should do is assess the debt. The debt must be at least £5,000 in value. It must also be unsecured and provable in bankruptcy.

The creditor must be able to demonstrate that the debtor has no reasonable prospect of paying the debt.

Issuing a statutory demand

Before a bankruptcy petition can be filed, the bankruptcy petition must be served personally on the debtor. The statutory demand gives the debtor 21 days to pay the debt or reach an agreement to secure it.

If the debtor fails to comply with the demand, it is considered proof of inability to pay.

Preparing the bankruptcy petition

The creditor needs to prepare the bankruptcy petition form. This should include a statement of truth, detailing the debt owed and the grounds for the petition. The petition should be accompanied by any relevant evidence and the statutory demand (if applicable).

Court Fees

The creditor is required to pay a court fee and a deposit to cover the costs of the bankruptcy proceedings.

Filing the Petition

The completed petition and accompanying documents need to be filed with the court. The court will review the documents to ensure they are in order and then set a date for the hearing.

Serving the Bankruptcy Petition

The creditor is responsible for service on the debtor. This must be done in person unless the court agrees to an alternative method of service. Proof of service must be filed with the court.

Bankruptcy Hearing

The hearing may take place at the local county court, or in some circumstances, The Royal Courts of Justice. At the hearing, the court will consider the evidence presented by both the creditor and the debtor. The debtor can oppose the petition on various grounds, such as disputing the debt’s validity or amount.

If the court is satisfied that the debt is owed and the debtor cannot pay, it may issue a bankruptcy order.

Bankruptcy Order

Once a bankruptcy order is made, the debtor’s assets are placed under the control of a trustee in bankruptcy, who will manage and sell assets to pay off creditors.

Responding to a bankruptcy petition

Receiving a bankruptcy petition is a serious matter, and it’s crucial to act promptly and considerately to address it.

You may wish to seek legal advice from a solicitor specialising in insolvency law as soon as possible. You may also wish to consider whether you can pay the debt or negotiate a settlement with the creditor before the court hearing. If you believe the petition is unfounded (e.g., if the debt is disputed), gather evidence to support your case.

If there are grounds to dispute the debt (e.g., if the debt is not due, the amount is incorrect, or it is subject to a genuine dispute), you should inform your legal advisor. They can help you prepare a defence and represent you in court.

Sometimes, it is possible to reach an agreement with the creditor to repay the debt. This can be done in full or in part, or to agree on a payment plan. If an agreement is reached, the creditor might withdraw the bankruptcy petition.

It is vital to attend the court hearing. If you don’t, the court is likely to issue a bankruptcy order in your absence. If you are disputing the debt or have reached an agreement with the creditor, the court needs to be informed.

Depending on your financial situation, there may be alternative solutions to bankruptcy, such as an Individual Voluntary Arrangement (IVA) or a Debt Relief Order (DRO), if you meet the criteria. Discuss these alternatives with your solicitor.

How can ARC Costs assist?

If you would like to issue or defend bankruptcy petitions, ARC Costs maintain an extensive legal network of expert Solicitors in this area. We would be happy to pass on your details to assist.

ARC Costs can assist will all aspects of claiming or defending bankruptcy petition costs.

ARC Costs are a team of independent and experienced Costs Draftsmen and Costs Lawyers who regularly assist you in the recovery/contention of costs.

Whether you are the Paying Party or the Receiving Party, we hold vast experience in dealing with costs matters on both sides.

We can assist in fixed recoverable costs cases and cases where costs are awarded on the standard basis, including the preparation/challenging of Bills of Costs, conducting of detailed assessment proceedings, and the preparation of Points of Dispute/Reply.

Should you require our assistance or have any further queries regarding costs, please contact us on 01204 397 302 or email one of the team at info@arccosts.co.uk. Alternatively, please complete our online enquiry form, and we will contact you to discuss your query or speak to our staff using the live chat function.

We may receive payments from third party solicitors on our panel to whom we may refer your claim. We will never charge you for any referrals made to our panel of third parties.