The court can make a bankruptcy order against an individual who fails to pay their debts, which ensures that all the assets of that individual are sold or used to repay their creditors (the people they owe money to).
However, this does not guarantee that all creditors are repaid in full. To make someone bankrupt you need to apply the court; however, not all courts deal with bankruptcy and if you are considering taking steps to make someone bankrupt, you should seek advice first from a solicitor or financial adviser.
What are the requirements for making someone bankrupt?
The court will regard an individual as being unable to pay his debts if you can prove that they owe you, or one or more other creditors, more than £750.
There are two ways by which you can prove this: firstly, by serving a ‘statutory demand’ (a written request for payment) on the debtor for the money due, which the debtor then fails to pay or secure within 21 days.
Alternatively, you can use an unsatisfied execution of judgment to prove your case. This is when the court has given you permission to recover the debts, but you have been unable to do so.
An example of this would be if the bailiffs were unable to take enough assets to cover the debt.
You can obtain the relevant forms for your petition (application) from the Insolvency Service website or you can buy them from a legal stationer.
For help filling out the forms, you should contact a solicitor or the Citizens Advice Bureau.
You should also be aware that when your application is presented at court you will have to pay £190 to cover court costs and £600 to cover the costs of administering the bankruptcy.
The latter fee may be repaid to you if enough money is raised from the sale of the debtor’s assets.
What is the procedure?
You may wish to contact a solicitor to help you with the following five steps:
- A copy of your petition must be formally brought to the attention of the debtor (‘served’ on the debtor).
- You must confirm that the debtor has a copy of the petition by either completing a statement of truth, form 6.17A if the petition was served on the debtor or a statement of truth, form 6.18A if the petition was sent to the debtor in some other way (with the permission of the court).
- The court will set a date to hear your case at least 14 days after the petition is served and the debtor has up to five working days before the hearing to oppose it.
- Use form 6.21 to list any other creditors as they may have to appear before the court.
- At the hearing the court can: make a bankruptcy order, meaning that the debtor is now bankrupt; delay or stop the proceedings (for example, ask for more information; dismiss (reject) your petition; or adjourn the hearing.
What happens after someone is made bankrupt?
A trustee will be appointed to collect and sell the debtor’s assets and make any payments to the creditors. You should get advice about if and when your money will be repaid.