Bankruptcy

Reversing Out of Bankruptcy

You may find yourself bankrupt for all manner of reasons, however, it may not be in a position you wish to remain in. It may be that it is a mistake and you were not served with the correct papers or in the right time scale; in which case you may apply to have it annulled.

For an annulment, you will need to obtain the application from the Court dealing with your bankruptcy and send the form to the Court with a Witness Statement saying why the Bankruptcy Order should not have been made. The Court will set a date for the hearing and it is advisable that you attend in person. This application is made pursuant to Section 282(1)(a) of the Insolvency Act 1986.

You must then notify your Trustee in Bankruptcy (the Official Receiver or independent Insolvency Practitioner appointed in his place) of the time and place of the hearing and give them copies of the papers you have filed in Court. Soon after the hearing, the fees and expenses of the bankruptcy have to be paid and as part of hearing your application to Court will determine who should pay these.

Alternatively, you may have funds readily available to make an application to have the bankruptcy annulled.

This application pursuant to Section 282(1)(b) follows a similar procedure to that above, except that in the Witness Statement you will need to produce evidence that either you have paid off your creditors, or that they have confirmed they no longer wish to claim or you can provide that (immediately upon discharge) you can pay unsecured creditors in full with interest, together with the cost and expenses of the bankruptcy.

Finally, you may apply for an Individual Voluntary Arrangement ("IVA") to reverse out of bankruptcy by putting forward a proposal for an IVA which gives or demonstrates a better return to creditors than if the bankruptcy were to continue.

Most bankruptcies produce little or no dividend/return to creditors, so if you wish to avoid remaining a bankrupt, and you have a proposal that would give a better return to creditors by providing:-

Once creditors have approved your proposed IVA at the creditors meeting, then you may apply to the Court to have your bankruptcy annulled. This application may only be made 28 days after the creditors meeting.

If you are pursuing the above options, you may apply to the Court for a "stay of advertisement" and this need to be done immediately. Telephoning the Court and the Official Receiver to tell them of your intentions could prevent your bankruptcy being advertised in the London Gazette and a local paper and thereby you may avoid the stigma and embarrassment of your predicament.