Personal Insolvency
Bankruptcy Against an Individual
The previous information regarding Post-Judgment Bankruptcy is entirely applicable to standard Bankruptcy, just less the Judgment being obtained first. Bankruptcy tends to be more “black and white” than County Court Enforcement, as it falls under SD2 – Statutory Demand Under Section 268(1) (A) of the Insolvency Act 1968; Debt For Liquidated Sum Payable Immediately. In short, if the debtor is deemed “insolvent” (unable to pay back their contractual payments), they are eligible to be made bankrupt. Once the Statutory Demand is served, the Liquidated Sum becomes payable immediately, therefore it is up to the clients to accept or reject an offer proposed. The threat of bankrupting someone is only credible if you can actually follow through if they fail to pay. So, can you bankrupt them? You can, provided the debt they owe meets these criteria:
- It is undisputed;
- It is unsecured, or secured but you are willing to relinquish the security;
- It exceeds £5,000;
- The debtor is unable to pay or has no reasonable prospect of paying.
The law stipulates that you have to prove the person cannot pay and there is only 2 ways of doing this. You can either, have a Judgment against the debtor and aim to enforce it, but subsequently fail, or, you serve the debtor with a Statutory Demand and it has not been complied with. As long as one of these conditions is met, the debtor cannot use the defence of them being “solvent” to defend the bankruptcy proceedings.