Insolvency Made Clear: A Guide for Debtors

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Introduction and aim of this book This book is for individuals who are facing bankruptcy and those whose companies are facing insolvency. The book is divided into six parts. Part 1 deals with individual bankruptcy and what happens to the bankrupt and their families during the bankruptcy; Part 2 covers the equivalent process when companies go insolvent; Part 3 focuses on how to appeal a decision of the court; Part 4 explains how costs may be awarded against parties in different situations; Part 5 provides information on how best to use a lawyer if resources are limited, and litigation tips if the debtor has to represent themselves; and finally, Part 6 consists of two annexes which contain model documents and checklists. These documents and checklists are also available as text documents so the reader can amend the templates as they wish (the files are provided within the digital download pack). Part of the difficulty people face when having problems with debt are technical terms used without an explanation. ‘Insolvency’ is the word used when a person or a company has more debt than assets; or who/which cannot pay a debt which has fallen due. If that someone is a person, this can lead to them going bankrupt. Bankruptcy is a court process where a stranger, the ‘Trustee in Bankruptcy’, takes control of the financial affairs of the bankrupt, selling most of the available assets to pay off the creditors. ‘Bankruptcy’ can be used loosely to mean ‘insolvency’, or precisely to refer to the court process where a bankruptcy order is made. This book tries to find a balance between using the correct legal terms – which are essential to understand since they will be the words used in court and in legal documents – and being comprehensible. Bankruptcy is not the only insolvency process an individual can enter: see Chapter 1. The processes for a company are different and are set out in Chapter 13. For some, bankruptcy is a way to escape debts and start again. How to do this voluntarily is explained in Paragraph 3.3. Others look for an alternative. Chapter 3 also discusses when to contest and when not to contest the making of a bankruptcy order. xxix
Insolvency Law Made Clear – A Guide For Debtors Many people cannot afford legal advice or need to be careful with how they use the resources they have for legal advice. Chapter 17 offers guidance to those who can only afford limited legal advice, or who cannot afford any. The book should also be useful for volunteers in legal advice centres, or for professional lawyers who do not often encounter insolvency problems. It exclusively covers the law of England and Wales. The book cannot cover every situation. It tries to cover the most common problems which individuals face. There is plenty of material available to help debtors. This book is different because it focuses on court processes. It describes what happens at a late stage of a debtor’s financial problems, if these problems are not resolved sooner. Most other available books advise on financial management before the problem proceeds to court. Resolving debt issues before they come to court will lead to a better outcome for the individual, but often this advice comes too late. It may not be enough for someone who has received a statutory demand to think about financial management: they also have to understand and participate in the bankruptcy process or they could be made bankrupt within two or three months. Fortunately, creditors typically prefer to avoid going to court (also known as ‘litigation’). Litigation is expensive. It commonly happens that the people litigating (‘the parties’) spend more on lawyers than their original dispute was worth. However, some creditors are reluctant to compromise. Chapter 18 discusses strategies for negotiating with those creditors who are prepared to settle a case without making a debtor bankrupt. One of the key messages of this book is that debtors should use the fact that the English legal system is expensive and slow to their advantage to achieve a realistic settlement. It may also be useful for debtors to know what is likely to happen if they cannot resolve their debt problems any other way. Insolvency is common for both individuals and companies. Statistics from the Insolvency Service show that approximately 122,000 people went insolvent in 2019, which is 1 out of every 400 adults in England and Wales. Of these, about 78,000 signed an ‘individual voluntary arrangement’ (see Chapter 1), 27,000 had a ‘debt relief order’ (again, see Chapter 1) and 17,000 went bankrupt. These three processes all have similarities. More is known about individuals who voluntarily go bankrupt than those who are forced to do so. The most common causes of bankruptcy for people who voluntarily go bankrupt are the debtor living beyond their means; relationship breakdown; reduction of the bankrupt’s income or loss of their employment. The typical debtor has approximately £35,000 of debt. This book focuses on bankruptcy even if it is the less common outcome. It is necessary to understand what bankruptcy is (and is not) to understand how to approach the other processes. xxx
Page 1 and 2: INSOLVENCY LAW MADE CLEAR A GUIDE F
Page 3 and 4: Published June 2021 ISBN 978-1-9163
Page 6: Acknowledgments I owe special thank
Page 9 and 10: Insolvency Law Made Clear - A Guide
Page 20 and 21: Preface: the effects of the pandemi
Page 22 and 23: Legal terms defined ‘The Act’:
Page 24 and 25: Legal Terms Defined A ‘dispositio
Page 26 and 27: Legal Terms Defined a bankruptcy or
Page 28 and 29: Legal Terms Defined A ‘third part
Page 32 and 33: Introduction And Aim Of This Book A
Page 34: Part 1 BANKRUPTCY The next few chap
Page 46 and 47: Chapter 2 Effect of bankruptcy This
Page 48 and 49: Effect Of Bankruptcy will only choo
Page 50 and 51: Effect Of Bankruptcy Box 5: HOW MUC
Page 52 and 53: Effect Of Bankruptcy by giving noti
Page 54 and 55: Effect Of Bankruptcy the seller goe
Page 56 and 57: Effect Of Bankruptcy The judge held
Page 58 and 59: Effect Of Bankruptcy Finally, the f
Page 60 and 61: Effect Of Bankruptcy to have an awk
Page 62 and 63: Effect Of Bankruptcy 2.10 Running t
Page 64 and 65: Effect Of Bankruptcy although it is
Page 66 and 67: Effect Of Bankruptcy either volunta
Page 68 and 69: Effect Of Bankruptcy 2.16 Investiga
Page 70 and 71: Effect Of Bankruptcy ‘privileged

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