Paying Off or Ending Your Bankruptcy

Here you can download our Paying Off Or Ending Your Bankruptcy booklet. An example of the useful information you can find in the booklet is featured below.


1. Introduction

The making of a bankruptcy order does not have to be final and it is possible to apply to the court to cancel the bankruptcy order. The process is known as the “annulment” of the bankruptcy order.

The effect of the annulment of the bankruptcy order is that the individual previously declared bankrupt is returned to their pre-bankruptcy position, with control over their own financial affairs, assets and debts, their credit record amended and the statutory restrictions (to which they would otherwise have been subject) removed as a result of the successful application.

There are a number of circumstances set out in legislation where the court has the power to grant an annulment a bankruptcy order and these are set out below.

2. Annulment Ground 1: Where The Bankruptcy Order Should Not Have Been Made

The court can annul a bankruptcy order if there are circumstances which, if notified to the Court, would have led to the dismissal of the Bankruptcy petition.

Examples of such circumstances are as follows:

a)    Where the debt was not due.

b)    Where the debt is disputed in its entirety (note that if there is any agreed amount in excess of £750 then that will be sufficient for a Bankruptcy Order to have been made).

c)    Where the debt is already subject to a previous bankruptcy which was not notified to the Court.

d)    Where a formal arrangement exists between the individual and his/her creditors was entered into and the Court was unaware of this.

e)    Where the petition for the Bankruptcy Order is procedurally defective (for example it is based on a statutory demand not properly served or the petition itself has a procedural defect).

f)    Where misleading or incorrect information has been provided to the Court which led to the making of the Bankruptcy Order, or it appears that the bankruptcy petition was in any other way an abuse of the Court process.

g)    Where a Bankruptcy Order is made against someone under the age of eighteen in respect of a debt that is not legally enforceable against them.

3. Annulment Ground 2: Where The Debts And Expenses Of The Bankruptcy Have Either Been Paid Or Secured To The Satisfaction Of The Court

The court can annul a bankruptcy order if it is shown to the satisfaction of the court that all of the debts, costs and expenses of the bankruptcy estate have been paid in full or are secured. This is often referred to as annulling the bankruptcy on a paid in full basis.

This is basically a payment of all the creditors in your bankruptcy estate, plus interest from the date of the Bankruptcy Order (at the Judgment Rate, currently 8% per annum), plus the costs incurred by the Secretary of State/ Official Receiver in administering the bankruptcy, plus the fees and expenses of any appointed Trustee in Bankruptcy.

These debts and expenses can severely mount from the sum of the original Bankruptcy Order and thus it is vital to deal with this sooner rather than later. It is often the case that an annulment (which may often be sought as an alternate to losing your home) is applied for some time after the commencement of the bankruptcy proceedings and as a result of the delay then the bankruptcy debts and expenses may have increased substantially since (and may even exceed the original creditor claims).

4. Are The Debts To Be Paid In Full Or Secured?

All debts that have been claimed by creditors (accepted as valid by the Trustee in Bankruptcy) in the bankruptcy estate must be paid in full or secured to the satisfaction of the court where an annulment is sought on a paid in full basis.

If a creditor cannot be located or a debt is disputed the bankrupt must provide adequate security to the court to satisfy any sum that may be subsequently proved to be due to the creditor.

Where the bankrupt provides security in respect of an unpaid creditor (such as by paying a sum into the court), the court may direct that details of the alleged debt and security are advertised to bring the debt to the attention of the unpaid creditor (with such payment potentially being refunded to you if the creditor does not come forward).

Alternatively, some creditors will have no interest in the bankruptcy proceedings as their debt is secured over an asset. The most popular example of his situation is where a mortgage exists over the residential home. In this case the mortgagee will not participate in the bankruptcy, but rather just rely on its security (provided mortgage payments carry on being made).

It is the court who decides whether the security granted to the creditor is satisfactory and some creditors may be part secured and part unsecured, in which case the unsecured element needs to be provided for as part of an annulment application (for example where a property is in negative equity).



5. What Are The Expenses Of The Bankruptcy Estate?

6. Annulment Ground 3: Where An Individual Voluntary Arrangement Has Been Approved.

7. Seeking Annulment – Doing It Properly

Should you require any further assistance at all with these matters, then please contact one of our corporate specialists on 020 7841 0390 and we will be happy to discuss this with you.