In short, a bankruptcy petition is an application filed with a court (usually by a creditor) to request that that a person who owes them money (a debtor) be declared as bankrupt by the court. Usually, once someone has been declared bankrupt, a debtor’s assets will be taken and sold in order to pay the creditor and the debtor will be subject to strict financial constraints. In order to begin bankruptcy proceedings, a debtor must owe a minimum of £5,000 to the creditor.
If a creditor’s intention is simply to get paid, there may be quicker, easier, and cheaper options available to them.
Bankruptcy is usually seen as a last resort, generally used when a creditor has exhausted all other avenues of recovery. Whilst many debtors who are presented with a bankruptcy petition do pay their debts, it should be expected from the outset that most debtors in that situation have no assets to pay their debts with and a creditor could recover nothing. Further, it is not a cheap process, and a creditor should expect to incur costs and legal fees in the region of £2,000 for a straightforward application seen through to conclusion.
Before a bankruptcy petition can be presented to a court, the creditor (subject to limited exceptions) has to serve a statutory demand on the debtor. Once a statutory demand has been served and expired, a creditor should carry out checks with the appropriate courts and the Land Registry to check for any existing petitions. If no prior petitions exist, a creditor can present its petition to the court.
The court will then seal the petition (effectively ‘issue’ and make it live) and list the matter for a hearing. It is then the creditor’s responsibility to ensure that the petition is personally served on the debtor – this means hand delivering it to them. If a debtor cannot raise the funds to satisfy the debt owed under the petition, then they will have very little chance of convincing a court not to adjudge them bankrupt at the hearing.
If you are owed £5,000 or over by a debtor and want to begin bankruptcy proceedings, then Debt-Claims Solicitors are here to help. Our specialist debt recovery lawyers are experts in all things debt-related and will manage the bankruptcy process from start to conclusion.