Cancelling/annulling a Bankruptcy Order

Background

FWJ was approached by our client who had a Bankruptcy Order made against her in respect of a relatively low value disputed debt.

The Bankruptcy Order was made without our client’s knowledge following a number of hearings and exchange of correspondence that our client had entered into with the Court and the petitioning creditor’s representatives.

At the first hearing of the Bankruptcy Petition, our client disputed the debt claiming that the sum demanded was more than the sum actually owing. The petitioning creditor admitted that the sum stated in the Bankruptcy Petition was too high and the Court ordered the Petitioning Creditor to confirm the sum due and serve an amended Bankruptcy Petition stating the lower sum due.

The petitioning creditor failed to correctly serve the amended Bankruptcy Petition on our client and advised our client that they would seek an adjournment of the next hearing of the Bankruptcy Petition to serve the amended Bankruptcy Petition. However, despite incorrect service and advising our client that they would not seek a Bankruptcy Petition, the petitioning creditor simply attended the hearing persuaded the Court to make the Bankruptcy Order.

Our client was a professional, who was not insolvent and had a number of assets including a matrimonial home. Our client wished to dispose of the Bankruptcy Order as soon as possible before others became aware of its existence and was willing to satisfy the disputed debt in full to resolve the issue.

Our advice and assistance

Immediately following the making of a Bankruptcy Order, the Court normally contacts the Official Receiver (“the OR”) (who is a civil servant in the Insolvency Service and an officer of the court) to review the Bankrupt’s affairs. The OR has responsibility from the date of the Bankruptcy Order for administering the Bankruptcy Estate and protecting the Bankrupt’s assets for the benefit of the Bankrupt’s creditors. In addition, the OR will provide notice of the Bankruptcy to local authorities, courts, HM Revenue and Customs, utility suppliers as well as to banks, building societies and insurers to ascertain the full extent of a Bankrupt’s liabilities assets and liabilities. In addition, details of the Bankruptcy order will be registered at the Land Registry to prevent a Bankrupt from disposing of a property that they own and bank accounts will be frozen.

If a Bankruptcy Order is disputed, it is extremely important that action is taken as soon as possible to cancel/annul the Bankruptcy Order to stop the OR and any subsequently appointed Trustee in Bankruptcy taking action against a Bankrupt’s estate.

We were approached by our client to assist with an application to the Court for the annulment/cancellation of the Bankruptcy Order on the grounds that our client intend to pay the debt in full that was confirmed in the amended Bankruptcy Petition.

However, upon reviewing the Bankruptcy Petition and the Court proceedings leading up to the making of the Bankruptcy Order we were able to establish that the petitioning creditor had made a number of procedural errors, including misleading our client, such that it could be claimed that the Bankruptcy Order should be cancelled/annulled on the grounds that the Bankruptcy Order should not have been made.

In addition, we advised our client to seek the payment of her costs of making the application to the Court for the annulment/cancellation of the Bankruptcy Order from the petitioning creditor.

We prepared our client’s application and supporting evidence and arranged a barrister to attend the hearing.

In addition, at the time of our instruction the OR had already frozen our client’s bank accounts and started to review our client’s financial affairs. We immediately contacted the OR on behalf of our client and obtained the OR’s agreement to unfreeze our client’s bank account and place the appointment of a Trustee in Bankruptcy on hold pending the outcome of our client’s application to the Court for the annulment/cancellation of the Bankruptcy Order.

The Outcome

The Court agreed that the Bankruptcy Order should not have been made based upon the procedural errors made by the petitioning creditor when serving the amended Bankruptcy Petition and ordered the annulment/cancellation of the Bankruptcy Order.

More importantly, the Court agreed that the petitioning creditor should be liable for our client’s legal costs of seeking the annulment/cancellation of the Bankruptcy Order. Our client’s legal costs were the same level as the petition debt, and the Court ordered that our client was entitled to set off her legal costs against the petition debt so that no sums were due to the Petitioning Creditor.

The overall result was that our client was able to dispose of the Bankruptcy Order relatively quickly without it impacting her personal and professional life.

If you find yourself in similar circumstances to those of our client as detailed above, please do not hesitate to contact Rebecca Robinson, Layla Okacha or Tim Francis on 020 7841 0390 for a no-obligations discussion.