If you are already bankrupt and believe, for whatever reason, that the bankruptcy order should not have been made or that you or a third party has enough money to pay off your debts in full, there are options available to annul or cancel your bankruptcy. A third-party fund may come from a friend or family member.
When do I make an application to annul my bankruptcy order?
Once a bankruptcy order has been made it is possible for it to be annulled on certain grounds. If the annulment order is made it effectively returns the bankrupt to his original position. This means in other words that the bankruptcy is treated as if it had not ever occurred.
An annulment order can only be obtained from the Court by making a formal application.
What are the grounds to apply for an annulment?
There are two main grounds upon which to apply for an annulment. The first of these is that the order should not have been made. The second is that the bankruptcy debts and expenses have either been paid in full, or secured for, to the satisfaction of the court.
It is also possible to obtain an annulment of a bankruptcy order where a bankrupt subsequently enters into a Voluntary Arrangement, which is approved and accepted by the creditors.
Let us now look at the two main grounds in turn.
The bankruptcy order ought not to have been made
These applications are not as simple as they sound. You should not confuse such an application by thinking that you can simply argue that the bankruptcy order is unfair, disproportionate or unreasonable. This ground covers applications where they are based upon either a technical defect with legal procedure, such as that the debt had already been paid or is less than the current bankruptcy limit of £5000.
Another example or circumstance in which this type of application may be successful is if the bankruptcy order was made and based on evidence which turned out to be false or untrue.
An example of the latter is where a creditor has agreed to give the debtor time to pay the debt and agreed to postpone the hearing of the petition but the petitioning creditor’s solicitor was unaware of the arrangement to postpone the hearing and consequently a bankruptcy order was made. It is important to note that this ground is a discretionary remedy on the part of the court and the circumstances in which it can be relied upon are quite strict and narrow.
Bankruptcy debts and expenses have been paid in full
In our experience this is by far the more common ground upon which the application for an annulment can be made and the relevant section is 282 (1) (b) of the Insolvency Act 1986. A bankrupt must prove that he has paid his debts and expenses in full or secured them to the satisfaction of the court. It is important to note that the bankruptcy debt includes not only the original debt as referred to in the bankruptcy petition but also the costs and expenses of the bankruptcy, and in some situations, interest.
Accordingly it is not sufficient to simply pay the petition debt in full and hope that the court will annul the bankruptcy order. Instead once a bankruptcy order has been made the bankrupt needs to be able to discharge all of his debts irrespective of whether or not the creditors are pursuing the bankrupt for payment of those debts.
Importantly the court will not just take a bankrupt’s word that the debts have been paid off. A careful analysis has to be made of the sums due to the creditors and then evidence must be produced in the form of a written witness statement in the correct format exhibiting proof that the payments have been made.
The court will also require a report from either the bankrupt’s trustee in bankruptcy or the official receiver. The purpose of the latter is to confirm that the debts have been paid in full.
When should I make the application for annulment?
As a general rule it is in the bankrupt’s interest to make an application to annul the bankruptcy order as soon as possible after he is declared bankrupt. The reason for this is that the effect of a bankruptcy order is draconian. Once a bankruptcy order is made a bankrupt will not be able to act as a director of a limited company or operate a normal bank account. Accordingly it can cause numerous problems and may ultimately be damaging to the bankrupt’s business.
That said an application based on the ground that the debts and expenses have been paid in full will take some time to produce. The reason for this is because the court requires a report from the trustee in bankruptcy or the Official Receiver as referred to above. The bankrupt must give them at least 28 days’ notice of the hearing. Unfortunately the bankrupt will also have to pay the costs of the hearing and those of the Official Receiver or trustee in bankruptcy.
Call our bankruptcy solicitors today
The above is only a general outline of this subject matter and should not be construed as amounting to legal advice. Every case will depend on its own facts. We fully appreciate that bankruptcy can be stressful and tough at times, but it does not have to be that way. We will help devise options and strategies to enable you to make informed decisions at every turn.
At Summit Law, we offer all our prospective clients a free initial no-obligation telephone consultation, the intention of which is to discuss the background of your case and to offer an opportunity for us to get to know you and more importantly, for you to get to know us.
For more information, please contact our personal bankruptcy lawyers today by calling 020 7467 3980. Alternatively, you can complete the online enquiry form and a member of our team will call you back to discuss your situation.