What is a creditor's petition?

 

Bankruptcy is an order which is petitioned for in court, and which declares an individual no longer responsible for the discharge of their personal debts. A bankruptcy petition can be filed by the debtor themselves if they no longer feel able to deal with their creditors.

How can a creditor file a petition?

A creditor's petition is a petition made to the court by a creditor, when a debtor owes him or her £750 or more. The amount owing must be a liquidated sum which is unsecured against any of the debtor's property.

For the creditor's petition to be successful, the creditor must:

  • Be able to claim that the debtor is unable to pay the debt
  • Have little prospect of being able to pay it

The creditor will usually be able to show that the debtor cannot pay his debt, by producing evidence that either the debtor has failed to pay a 'statutory demand' (a demand for payment formally served on the debtor by the creditor), or that the creditor has secured a 'judgement debt' (an order by a court to pay money) against the debtor. A bankruptcy solicitor can assist with presenting a creditor's petition to the court.

Any creditor who is owed less than £750 cannot present a petition alone, but can join together with other creditors to present a petition, provided the total amount of debt exceeds £750. The petition should be presented to either the High Court, if the debtor lives or carries on business in London, or a County Court with bankruptcy jurisdiction in the area that the debtor resides or carries on business.

The implications of bankruptcy

Bankruptcy is a serious matter. If a bankruptcy order is granted, the debtor ceases to retain control over their financial affairs, which are passed over to a trustee known as the Official Receiver. The Official Receiver is normally an experienced solicitor or insolvency practitioner who will administer the debtor’s affairs for the duration of the bankruptcy order. Bankruptcy orders usually last around 12 months.

The award of a bankruptcy order means that as a creditor you are no longer able to pursue the debtor directly for repayment. Any legal actions you have outstanding against the debtor must be dropped and any communications must be made with the Official Receiver. The Official Receiver is granted the power to realise any assets that the debtor possesses. This can include:

  • Selling their home and car
  • Selling their luxury possessions
  • Even closing down their business

Once all assets are realised, creditors are paid off in turn. At the end of the bankruptcy period, all outstanding debts are considered written off.

If you are owed more than £750 you should consult your solicitor for advice on making a creditors petition for bankruptcy. You must demonstrate that you have exhausted all normal routes to gaining repayment, including a final written or statutory demand. You may commence your petition 18 days following a statutory demand, or 21 days from a final written demand.

Have more unanswered questions? See our general information page on bankruptcy.

Are you a creditor who needs help petitioning for another person’s bankruptcy? Are you about to face bankruptcy? Contact Law can put you in touch with specialist bankruptcy or insolvency solicitors who can assist in dealing with your matter as quickly as possible, to avoid future financial stress. Please call us on 0800 1777 162 or complete the web-form above.

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