CREDITORS OF A BANKRUPT
How do I find out who is dealing with a case?
You should be contacted automatically by the Official Receiver/Insolvency Practitioner (OR/IP), whoever is trustee, if he or she knows that you are a creditor.
Bankruptcy - the procedure
Bankruptcy can only apply to individuals (including sole traders and individual members of a partnership).
Bankruptcy petitions may be presented to the Court by the individual, by creditors who are owed £750 or more or by the supervisor of an individual voluntary arrangement (where the individual has not complied with the terms of the arrangement). A bankruptcy order is made by the High Court.
The Official Receiver initially acts as receiver and manager of a bankrupt's estate and will normally become trustee unless an Insolvency Practitioner is appointed in his place. The trustee realises any assets (except for certain assets which include basic domestic items needed by the bankrupt and his or her family and items such as vehicles, equipment, tools and books which are needed for the bankrupt's job). After the payment of fees and costs of the proceedings, the trustee distributes the remaining funds to the creditors in a strict order of priority.
Restrictions on a bankrupt
An undischarged bankrupt can trade after the bankruptcy order but there are restrictions.
If an undischarged bankrupt trades under a new name, he or she must disclose the old name (under which the bankruptcy order was made) to anyone with whom he or she does business. An undischarged bankrupt is not allowed to act as a director of a company or be concerned with its management, without leave (permission) of the High Court. An undischarged bankrupt can only obtain £500 of credit without informing those he or she is dealing with about the bankruptcy. An undischarged bankrupt has to seek permission from either the Official Receiver or the Court before he or she can leave Northern Ireland.
Prior to 27 March 2006, a bankrupt was usually discharged (freed) automatically from the restrictions of bankruptcy after 3 years. If a person had been bankrupt before (within the previous 15 years), he or she had to wait 5 years before applying to the High Court for discharge.
From 27 March 2006, a bankrupt will usually be discharged automatically from the restrictions of bankruptcy after 12 months, or earlier if the OR files notice with the Court. Most individuals who were undischarged bankrupts on 27 March 2006 will be discharged automatically on 27 March 2007 or sooner.
Also from 27 March 2006, a bankrupt may have a Court Order made against him or her (called a bankruptcy restrictions order) or give an undertaking to the Department which will mean that bankruptcy restrictions continue to apply after discharge for between 2 and 15 years.
When will I be notified?
The OR will normally notify all known creditors (within 12 weeks of the date of the High Court order) whether a meeting of creditors will be held. The OR will decide to hold a meeting if there are significant assets.
You will also be sent a report giving estimates of the insolvent's assets and liabilities and what the causes of the failure are considered to be. If you think that a bankrupt is withholding information about his/her assets, you should write to the OR.
How do I make a claim?
To make a claim you should ask the OR/IP (Official Receiver/Insolvency Practitioner) for a proof of debt form and complete and return it to the OR/IP.
Meeting of creditors
A first meeting of creditors is held so that the creditors can appoint an Insolvency Practitioner (IP) as trustee in place of the Official Receiver (OR).
Conduct and voting at a meeting of creditors
You can normally only vote at a meeting if you have returned your proof of debt to the Official Receiver/Insolvency Practitioner (OR/IP) within the time stated in the notice.
You can vote at the meeting without attending personally but you must also have submitted a proxy form. The form is supplied by the OR/IP at the same time as the notice calling the creditors' meeting and you must return it by the time specified. The proof of debt and proxy form must be signed by the same person. Voting at a meeting of creditors is by value, and is calculated by the amount of the creditor's claim that is admitted (accepted) by the chair of the meeting for voting purposes. The chair will check all the proofs of debt and proxy forms, and confirm the amount admitted for voting purposes.
Briefly, at a first meeting of creditors, the chair will check that everyone present is allowed to be at the meeting; s/he will explain the purpose of the meeting, and provide details about the insolvent's assets. The meeting then votes on the appointment of an IP as trustee or liquidator. A first meeting of creditors is not an opportunity for you to question the bankrupt/director (it is unlikely they will be at the meeting) or to discuss matters relating to the insolvency.
For an IP to be appointed by the meeting of creditors, there must be a majority in value of those present or represented (by proxy) voting for the IP.
Creditor's committee
A creditors' committee can also be appointed at a meeting of creditors unless the Official Receiver remains as trustee.
The committee supervises and assists the trustee on behalf of the creditors. In bankruptcies it is called a creditors' committee. The committee consists of at least three and not more than five elected creditors.
An individual creditor who has been elected can act personally or appoint a representative.
You have a right to nominate yourself or any other creditor as a member of a committee. You can also vote for yourself.
A creditors' committee must approve certain actions proposed by the trustee. It agrees to carry on the bankrupt's business and brings or defends legal actions.
What the trustee will charge for their services
The Official Receiver's (OR) remuneration (i.e. what the OR will charge for his services) as trustee is specified under the insolvency legislation.
An Insolvency Practitioner's (IP) remuneration as trustee is fixed by the creditors' committee. If there is no committee, it may be fixed at a meeting of creditors. The remuneration can be fixed as a percentage of the value of the assets or on a time basis. Any creditor, with the support of 25% in value of unsecured creditors, can apply to the High Court for the remuneration to be reviewed if it is considered to be too high. If the creditors do not agree the remuneration, the IP will receive the same as would have been paid to the OR (a percentage fixed by the Insolvency Regulations, of assets realised and distributed).
The IP acting as trustee will be able to provide you with a guide as to how their fees will be calculated.
Completion of the case
If the Official Receiver (OR) is dealing with the case and you have sent in a proof of debt, the OR will inform you when he intends to apply (to the Department of Enterprise, Trade and Investment) for release.
This means that the OR's role as trustee comes to an end. The creditors have a right to object to the OR's release.
Please note that the release of the OR as trustee is not relevant to and does not affect a bankrupt's discharge. Generally the OR's release can only be withheld if the OR has failed to realise assets that were available to be realised or has misapplied the proceeds of any assets realised.
You will be sent a summary of the OR's receipts and payments as trustee.
If an Insolvency Practitioner (IP) is dealing with the case and you have sent in a proof of debt, you will be sent a notice of the final meeting of creditors. At this meeting the IP will report on his or her conduct of the case and will give a summary of the receipts and payments. The creditors have a right to object to the IP's release.
What legal action can I take against the bankrupt or the trustee
After the date of the High Court order, unsecured creditors cannot take any action against the bankrupt without the consent of the Court. You must submit your claim to the trustee. You can apply to the Court if you are dissatisfied with the actions of the OR/IP.
