Making someone bankrupt

Making a bankruptcy order

You apply to the High Court using a 'bankruptcy petition'.

A bankruptcy petition is usually presented by a creditor on the grounds that the debtor cannot pay his/her debts. A bankruptcy petition can also be presented by either the debtor or, if the debtor has already made a voluntary arrangement to deal with the debt, by the supervisor of this arrangement.

Prove that the debtor cannot pay his/her debts

The High Court will regard an individual as being unable to pay his/her debts if either of the following occurs:

• a creditor who is owed more than £5,000 serves a 'statutory demand' for the money due and it is not paid or secured (for example, by a guarantee to provide something else of the same value) 
• a settlement is not agreed, within 21 days, and the debtor has not applied for the statutory demand to be set aside

Statutory demand

You can get a statutory demand from the Bankruptcy and Chancery Office at the High Court or by searching the publications on our website. The forms for the statutory demand are:

• Form 6.01 - to be used for a debt for a specific amount which is payable now
• Form 6.02 - to be used for a debt of a specific amount which is payable now following a judgment or order of court
• Form 6.03 - to be used for a debt that is payable in the future

Serving a statutory demand

The completed form must usually be served on the individual in person. The creditor must have proof of service, so it is usual to employ a process server to carry out this function (these are listed in Yellow Pages under 'detective agencies').

The High Court is not involved in the issuing of statutory demands, so no court fee is payable.

Certificate of unenforceability

A creditor who is owed more than £5,000 obtains a court judgment against the individual it is lodged for enforcement with the Enforcement of Judgements Office (EJO), and a certificate of unenforceability is issued under Article 19 of the Judgements Enforcement (Northern Ireland) Order 1981 because the EJO is unable to seize enough assets to clear the debt.

You can get the forms to issue an application for enforcement from the EJO. Further information on this procedure can be obtained from:

Present a bankruptcy petition

You cannot just complete the petition and present it to the High Court. Insolvency law requires that:

• the petition be served on the debtor
• affidavits are lodged at court verifying the bankruptcy petition and that it has been served on the debtor

You may have to make further affidavits if, for example, you wish to withdraw the petition. Therefore, to ensure that you meet all legal requirements, it is usual to ask a solicitor to issue a bankruptcy petition.

Summary of the procedure

You as a petitioner must pay a deposit to the Insolvency Service (£700). You can pay the deposit on-line. As the petitioner, you must complete a bankruptcy petition. You should use either:

• Form 6.07 - 'Creditor's bankruptcy petition on failure to comply with a statutory demand for a liquidated sum payable immediately'- this form should be used if you have issued a statutory demand but the debtor has not complied with it
• Form 6.08 - 'Creditor's Bankruptcy Petition on Failure to comply with statutory demand for a liquidated sum payable a future date' - this form should be used if if you have issued a statutory demand requiring a debtor to establish to your satisfaction that there is a reasonable prospect of his being able to pay the debt when it falls due but the debtor has not complied with this
• Form 6.09 - 'Creditor's bankruptcy petition on Certificate of Unenforceability of a Judgement' -  this form should be used if the Enforcement of Judgements Office has been unable to seize enough assets to clear the debt
• you must also complete an affidavit (form 6.15) verifying the matters giving rise to the petition. If a statutory demand has been issued, you must complete a further affidavit verifying that the statutory demand has been served (form 6.13 or 6.14)

The petition is filed (handed in) at court and three copies made for the following purposes:

• one to be served on the debtor (see below)
• one to be attached to the affidavit (form 6.15) verifying the matters that led to the petition
• one to be served on any supervisor of an individual voluntary arrangement of the debtor

A court fee is payable on presentation of the petition (£186).

• the court then fixes the time and date when the petition will be heard. Normally there must be at least 14 calendar days between the petition being served on the debtor and it being heard in court
• a copy of the petition must be served on the debtor in person. If this is not possible the court can, on application, order that the petition be served on the debtor by alternative means, such as by post - this is known as 'substituted service' - a copy must also be sent to any supervisor of a voluntary arrangement. Immediately after service, the petitioner must file at court an affidavit verifying service of the petition (forms 6.18/6.19)
• if the debtor wishes to oppose the petition, he/she must give the court a notice specifying the grounds on which he is objecting at least seven calendar days before the hearing
• on the day of the hearing, you must prepare a list of people intending to appear at the hearing for the court, using form 6.23
• at the hearing, you (the petitioner), creditors (who have told you they intend to appear), the debtor and any supervisor of any voluntary arrangement all have the right to be heard

The court can then:

• stay (delay or stop) the proceedings
• dismiss the petition
• adjourn (postpone) the hearing or
• make a bankruptcy order

All the forms are in the Insolvency Rules (Northern Ireland) 1991 as amended, and you can get them from legal stationers - see Yellow Pages. Some of the forms are available in the publications section of this website where you can print them off for completion.

Cost

The fees you will have to pay are:

• the deposit of £700 towards the costs of administration of the bankruptcy paid to the Department for the Economy - this is a one-off payment towards the costs of the bankruptcy, and if the bankruptcy has enough assets, the petition deposit will be refunded to you - the deposit is payable in all cases and may be paid in cash, postal orders or cheque - all cheques should be made payable to the "Official Receiver". You can also pay online
• court fee of £186 - this fee may be paid by cash, cheque or postal order made payable to the "Supreme Court Fees Account"
• the cost for advertising the petition in the Belfast Gazette using a process server for the service of a statutory demand and the petition
• any costs for instructing a solicitor

After a bankruptcy order is made

After making a bankruptcy order, the court usually appoints the Official Receiver (a civil servant in The Insolvency Service and an officer of the High Court) to be receiver and manager of the bankrupt's affairs.

The Official Receiver has responsibility from the date of the bankruptcy for administering the bankruptcy and protecting the bankrupt's assets.

The Official Receiver will also act as trustee of the bankruptcy estate unless an insolvency practitioner is appointed. If this happens, the Official Receiver still has a duty to investigate the bankrupt's affairs. So two people may be involved in the bankruptcy:

• the trustee, who is responsible for selling the bankrupt's assets and distributing the money among the creditors
• the Official Receiver, who has a duty to investigate the bankrupt's affairs

Certain restrictions and duties are imposed on a bankrupt.

Appeal against or stop a bankruptcy

The court may 'annul' (cancel) a bankruptcy order. The bankrupt (and anyone else) can apply for an order to be annulled if:

• the court did not have all the relevant facts when making the bankruptcy order and would not have made an order had it known those facts
• the bankrupt can pay all the debts in full
• the bankrupt enters into a voluntary arrangement with the creditors

An application to annul the bankruptcy order can be made at any time (even after the bankrupt's discharge).

The bankrupt can apply for the 'rescission' (cancellation) of the bankruptcy order, if there has been a change in circumstances since the bankruptcy order was made. A rescission will usually only be granted in exceptional circumstances and normally requires the consent of the petitioning creditor.

The bankrupt can 'appeal' against a bankruptcy order on a point of law. As a result of an appeal, the court can cancel the bankruptcy order or otherwise change its decision. The bankrupt should appeal within four weeks of the order being made.

Bankruptcy proceedings can be 'stayed' (stopped). The bankruptcy proceedings are usually only stayed while waiting for an application for an annulment, an appeal or a rescission of the bankruptcy order, or while an individual voluntary arrangement is being proposed.

• How to make someone bankrupt