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PRELIMINARY NOTE IN RELATION TO ANNULMENT OF BANKRUPTCY ORDERS
Posted on April 15, 2013 by srlaw, Click here for PDF Article Download


It is common for bankruptcy orders to be made against individuals without their knowledge.

This may occur, for example, if a creditor obtains an order for substituted service at an address where the individual no longer resides – but service at that address becomes legally effective. Further, writing a letter to the Court explaining why an individual cannot attend a bankruptcy hearing is almost invariably ignored by the Court and bankruptcy orders are often made in such circumstances. Bankruptcy can have the extremely unfortunate consequence of affecting the worldwide assets of an individual.

A bankruptcy order will be made if the amount claimed is in excess of the bankruptcy limit (currently £5,000). The order will affect the whole of the worldwide assets of the individual. Accordingly if the bankruptcy order is only for £5,000 and an individual’s assets are several million pounds, the bankruptcy will still result in the whole of the individual’s assets vesting initially into the Official Receiver and subsequently into the name of any appointed private Trustee in Bankruptcy. (If a private Trustee has been appointed then this will considerably increase the amount of the bankruptcy expenses. The fees of the Official Receiver, who is appointed initially, will usually be relatively modest by comparison.)

It is common for bankruptcy to be pursued following a judgment entered in default. The Bankruptcy Judge will not normally overturn such judgment. In such cases, if an individual wishes to contest the bankruptcy, he/she must apply to set aside the judgment in the County Court.

An application can be made to annul a bankruptcy order. If such an order is made, the individual is deemed never to have been bankrupted.

There are two grounds to annul a bankruptcy order:

a. that the bankruptcy order ought not to be made (this is a fairly difficult ground to satisfy).

b. that payment of all bankruptcy debts and expenses has been made in full (this is the most common ground to satisfy).

If the latter ground is to be relied upon, money will need to be raised from family, third parties or by way of bankruptcy annulment funding (a specialist form of funding, essentially taking the form of ‘bridging finance’. This is due to the fact that an individual has been adjudicated bankrupt and he/she is no longer able to raise money from their assets (which, following the making of the bankruptcy order, will be vested in the Official Receiver).

Once an annulment application has been submitted to the Court it is generally the case that the Official Receiver does not take steps to appoint a private Trustee in Bankruptcy and this will therefore give rise to significant saving in bankruptcy expenses.

Bankruptcy represents a core practice area of Simons Rodkin and we offer an initial fixed fee meeting at a cost of £75 plus VAT.

If you would like us to assist, please contact Lawrence Rodkin (Senior Partner).

Please note this is a preliminary advice note and is no substitute for the taking of detailed legal advice in what may potentially relate to a very complex legal position.

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