There are three ways a bankruptcy petition can take place in the UK:

  • You can petition for bankruptcy, known as a debtor’s petition
  • A creditor’s petition, for a creditor to apply for a bankruptcy order to be made against you
  • A supervisor’s petition, which your supervisor in an IVA would use

Please note that you must act quickly if you are being threatened with bankruptcy. Some steps can be taken to protect you, but only before matters go too far.

What are the grounds for you to present a bankruptcy petition?

To present a bankruptcy petition, you only need to meet the grounds that you cannot repay your debts. This is shown by submitting a statement of affairs with your petition form in court. On the statement of affairs, you will detail your financial position.

Please note that although there is only one ground, the court can dismiss your petition if the Insolvency Rules have been contravened. This can include your forms not being completed in the required format. See bankruptcy forms for more information.

When deciding if you cannot repay your debts, the court will usually determine whether your liabilities exceed your assets. I don’t think it is that simple for one minute, though. It may be that you have liabilities that arise in the future, for example, the shortfall on repossession and possibly personal guarantees that have not yet been called in. These will also have to be taken into account. You may also be in a position where your assets are more than your liabilities, but for some reason, you are unable to raise the money to repay your debts. Your inability to repay could mean you meet the grounds to petition for bankruptcy.

What is the procedure for petitioning for bankruptcy?

The procedure for you to petition for bankruptcy is outlined below:

  • Even if bankruptcy is your only option, seek help first. This is a must. Even if you must petition for bankruptcy because there is no other option, there can be some unwanted outcomes, so make sure you know what they are.
  • Be prepared for bankruptcy. You can personally take several steps to make the process much easier on you. Don’t forget things like your frozen bank account and any business closed. You still need to support yourself even after bankruptcy.
  • It’s ideal to make an appointment at court.
  • Make sure you meet the legal requirements to petition; you do not want to be turned away or have your petition dismissed. Remember, you will be expected to present your bankruptcy petition with a statement of affairs and the required fees.

What is the consequence of presenting a bankruptcy petition?

Firstly, you will be seen by a court clerk who will check your documents and fees (If the clerk is too busy, you may be asked to book an appointment). You will then either:

  • Have your petition heard straight away
  • Be turned away
  • Be asked to return at another date.This will depend on factors such as whether:
    • You have disregarded any of the rules laid out under Insolvency law. An example of this would be your forms not meeting the required standard.
    • An IVA is in place
    • You have the required fees
    • Does the court have any free appointments
    • You have attended the correct court
    • Etc.

If your petition is in order and the bankruptcy court has room, the hearing will usually occur. If you are in an IVA and considering bankruptcy, please note that the process is slightly different.

One not-so-well-known consequence of a bankruptcy petition being presented is that other legal proceedings, whether in progress or about to commence, can be put on hold at the court’s discretion.

Another consequence of the petition is that an Interim Receiver can be appointed to take control of your property. This usually happens when the court believes the property is at risk.

The Chief Land Registrar will also be notified of the petition for registration in the register of pending actions. This could have implications if you are about to sell your property. If you plan on transferring any property before petitioning for bankruptcy, please seek professional advice first. There may be significant consequences if you do.

When can a creditor petition?

A creditor can petition for bankruptcy on the same grounds as you: you cannot repay your debts. You must owe the creditor more than £750; that debt must be unsecured. The creditor will also have to follow strict procedures to present a petition and cause the bankruptcy order to be made against you.

Can my IVA supervisor petition for my bankruptcy?

Yes. If you default on your IVA,, there may be a clause in the terms that sobligates your supervisor to present a bankruptcy petition. There are three grounds under which they may present a default petition:

  • You failed to comply with your obligations under the IVA
  • You gave false or misleading information when the IVA was being arranged
  • You have failed to comply with your supervisor’s reasonable requests

For more information about the petition and statement of affairs, please go to the bankruptcy forms page.