How am I made Bankrupt?

We receive a lot of calls from the public asking, How am I made bankrupt? The answer is there are two ways:

1. By debtors petition
2. By creditors petition

By debtors petition

This means you pay the court costs and make yourself bankrupt. You have to pay the court and admin fees for this.

First, you will need to complete the following forms. You can get the forms, free of charge, from a local court that deals with bankruptcy. You can also complete the forms on-line or print the forms off at The Insolvency Service's website at: www.insolvency.gov.uk

• The petition (Insolvency Rules 1986 form 6.27) - this form is your request to the Court for you to be made bankrupt and includes the reasons for your request.
• The statement of affairs (Insolvency Rules 1986 form 6.28) - this form shows all your assets (anything that belongs to you that may be used to pay your debts) and all your debts, including the names and addresses of the creditors and the amount you owe each one. The form contains a declaration of insolvency that you will need to swear on oath before an officer of the court or a solicitor. You may have to pay an extra fee for this (see section 4).

You can complete both of the above forms online via The Insolvency Service's Online Forms Service. This is an interactive internet service which can be accessed at a time and location that is convenient to you via The Insolvency Service's website, www.insolvency.gov.uk. Just follow the link "Do It Online" from the homepage.

The Online Forms Service is easy to use and provides assistance to allow you to complete the forms on your own. There is also a dedicated enquiry line telephone number and e-mail address if you require additional guidance in completing the forms. The Online Forms Service allows you to save and retrieve partially completed forms, with the ability to edit previously saved information.

A secure database then captures the information you provide in the forms. This information is automatically deleted if you do not present your bankruptcy petition to the Court within six months, but if a bankruptcy order is made the information is made available to The Insolvency Service. This may reduce the need for the official receiver to ask you for additional information.

Once you have completed the forms you will need to print them and take them to court.

If you do not use the Online Forms Service you should complete the petition and statement of affairs forms in capital letters, using black ink. Court staff can only advise you on the court procedure and give you the forms you need. They cannot give you legal advice.

If you are dealing with a county court, the court will need the completed forms and 2 copies of each before it can accept your petition for bankruptcy. If you are taking your petition to the High Court, you won't need any extra copies. When you have completed both forms, and printed the forms if you have used the Online Forms Service, signed and dated the bottom of every page, and have the fees ready, you can go to the court and ask for your petition to be dealt with.

NB: If you are, or were, running a business in partnership (even if there is no formal partnership agreement) and all the partners want to be made bankrupt, you will need different petition and statement of affairs forms. These are available from your local court.

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By creditors petition

This means you someone that you owe more than £750 to makes you bankrupt.

Once bankruptcy proceedings have started, you must co-operate fully even if it's a creditor's petition and you dispute their claim. If possible you should try to reach a settlement before the petition's due to be heard - doing it later can be difficult and expensive.

You apply to the court using a 'bankruptcy petition'. A bankruptcy petition is usually presented by a creditor on the grounds that the debtor cannot pay his/her debts. A bankruptcy petition can also be presented by either the debtor or, if the debtor has already made a voluntary arrangement to deal with the debt, by the supervisor of this arrangement.

How do I prove to the court that the debtor cannot pay his/her debts?

The court will regard an individual as being unable to pay his/her debts if either of the following occurs:

• A creditor who is owed more than £750 serves a 'statutory demand' for the money due and it is not paid or secured (for example, by a guarantee to provide something else of the same value); or a settlement is not agreed, within 21 days, and the debtor has not applied for the statutory demand to be set aside.

• You can get the form for a statutory demand from your local court or The Insolvency Service website at www.insolvency.gov.uk. The forms for the statutory demand are:

• Form 6.1 - to be used for a debt for a specific amount which is payable now;
• Form 6.2 - to be used for a debt of a specific amount which is payable now following a judgment or order of court;
• Form 6.3 - to be used for a debt that is payable in the future.

The completed form must usually be served on the individual in person. The creditor must have proof of service, so it is usual to employ a process server to carry out this function (these are listed in Yellow Pages under 'detective agencies'). The court is not involved in the issuing of statutory demands, so no court fee is payable.

• A creditor who is owed more than £750 obtains judgment against the individual, and an execution is 'unsatisfied', i.e. the sheriff or bailiff was unable to seize enough assets to clear the debt. You can get the forms to issue a claim for judgment from your local court, or from the court service website at: www.courtservice.gov.uk. Court fees depend on the amount of the claim, and range from £30 to £1,700 - the court can tell you the precise court fee payable for a particular claim.

In which court should I present a bankruptcy petition?

Not all courts can deal with bankruptcy. You can present a bankruptcy petition at the High Court in London, or in a county court that deals with bankruptcy matters. Generally, you should present the petition for bankruptcy to the court that deals with the area where the debtor has lived or traded for the longest period in the previous six months. If the debtor lives in one court district and runs a business in another, you should go to the court dealing with the district where the business is, as this takes priority over the home address. If you are not sure which court you should go to, please phone your nearest county court for advice.

The address and phone number of your local county court are listed under 'Courts' in the phone book. Look for: 'civil courts - county courts' and not magistrates' courts. You will need to contact the court to find out if it has jurisdiction (authority) to hear a bankruptcy case. The Court Service website at www.courtservice.gov.uk has a list of county courts with bankruptcy jurisdiction and an index that shows what geographical area they cover.

How do I present a bankruptcy petition?

You cannot just complete the petition and present it to the court. Insolvency law requires that:

• the petition be served on the debtor; and
• statements of truth are lodged at court verifying the bankruptcy petition and that it has been served on the debtor.

You may have to make further statements of truth if, for example, you wish to withdraw the petition. Therefore, to ensure that you meet all legal requirements, it is usual to ask a solicitor to issue a bankruptcy petition.

Here is a summary of the procedure (also see Annex A):

• As the petitioner, you must complete a bankruptcy petition. You should use either:

a. Form 6.7 - 'Creditor's bankruptcy petition on failure to comply with a statutory demand'; or

b. Form 6.9 - 'Creditor's bankruptcy petition where execution or other process on a judgment has been returned unsatisfied in whole or part'.

• i. Use form 6.7 if you have issued a statutory demand but the debtor has not complied with it.
• ii. Use form 6.9 if a sheriff or bailiff acting on a court judgment has been unable to seize enough assets to clear the debt.
• You must also complete a statement of truth (form 6.13) verifying the matters giving rise to the petition. If a statutory demand has been issued, you must complete a further statement of truth verifying that the statutory demand has been served (form 6.11).
• The petition is filed (handed in) at court and 3 copies made for the following purposes:
  • one to be served on the debtor (see below);
  • one to be attached to the statement of truth (form 6.13) verifying the matters that led to the petition; and
  • one to be served on any supervisor of an individual voluntary arrangement of the debtor.
• A deposit and court fee is payable on presentation of the petition (see below).
• The court then fixes the place and date when the petition will be heard. Normally there must be at least 14 calendar days between the petition being served on the debtor and it being heard in court.
• A copy of the petition must be served on the debtor in person. If this is not possible the court can, on application, order that the petition be served on the debtor by alternative means, such as by post. This is known as 'substituted service'. A copy must also be sent to any supervisor of a voluntary arrangement. Immediately after service, the petitioner must file at court a statement of truth verifying service of the petition (form 6.17/6.18).
• If the debtor wishes to oppose the petition, he/she must give the court a statement of truth at least 7 calendar days before the hearing.
• On the day of the hearing, you must prepare a list of people intending to appear at the hearing for the court, using form 6.21.
• At the hearing, you (the petitioner), creditors (who have told you they intend to appear), the debtor and any supervisor of any voluntary arrangement all have the right to be heard. The court can then:
  • stay (delay or stop) the proceedings;
  • dismiss the petition;
  • adjourn (postpone) the hearing; or
  • make a bankruptcy order.

All the forms are in the Insolvency Rules 1986 as amended, and you can get them from legal stationers - see Yellow Pages. Some of the forms are available on The Insolvency Service website at www.insolvency.gov.uk where you can print them off for completion.

How much will it cost to make someone bankrupt?

• Petition deposit of £400 towards the costs of administration of the bankruptcy - this is a one-off payment towards the costs of the bankruptcy, and if the bankruptcy has enough assets, the petition deposit will be refunded to you
• Court fee of £190.
• Any costs for instructing a solicitor.

What happens after someone is bankrupt?

After making a bankruptcy order, the court usually appoints the official receiver (a civil servant in The Insolvency Service and an officer of the court) to be receiver and manager of the bankrupt's affairs. The official receiver has responsibility from the date of the bankruptcy for administering the bankruptcy and protecting the bankrupt's assets.

The official receiver will also act as trustee of the bankruptcy estate unless an insolvency practitioner is appointed. If this happens, the official receiver still has a duty to investigate the bankrupt's affairs. So 2 people may be involved in the bankruptcy:

• the trustee, who is responsible for selling the bankrupt's assets and distributing the money among the creditors; and
• the Official Receiver, who has a duty to investigate the bankrupt's affairs.

Certain restrictions and duties are imposed on a bankrupt - for further details, please read our leaflet 'Guide to Bankruptcy'.

Can anyone appeal against or stop the bankruptcy?

• The court may 'annul' (cancel) a bankruptcy order. The bankrupt (and anyone else) can apply for an order to be annulled if:
  • a. the court did not have all the relevant facts when making the bankruptcy order and would not have made an order had it known those facts; or
  • b. the bankrupt can pay all the debts in full; or
  • c. the bankrupt enters into a voluntary arrangement with the creditors.

• An application to annul the bankruptcy order can be made at any time (even after the bankrupt's discharge). For further information about annulment of the bankruptcy order, please refer to our leaflet 'Can my bankruptcy be cancelled?'.

• The bankrupt can apply for the ‘rescission’ (cancellation) of the bankruptcy order, if there has been a change in circumstances since the bankruptcy order was made. A rescission will usually only be granted in exceptional circumstances and normally requires the consent of the petitioning creditor.
• The bankrupt can 'appeal' against a bankruptcy order on a point of law. As a result of an appeal, the court can cancel the bankruptcy order or otherwise change its decision. The bankrupt should appeal within 4 weeks of the order being made.
• Bankruptcy proceedings can be 'stayed' (stopped). The bankruptcy proceedings are usually only stayed while waiting for an application for an annulment, an appeal or a rescission of the bankruptcy order, or while an individual voluntary arrangement is being proposed.

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