Counsel’s opinion


Business Money talks to City barrister Professor Mark Watson-Gandy about bankruptcy petitions


I am owed money by one of my clients. How do I bankrupt him?


A bankruptcy petition can be presented if you can show that the statutory grounds under section 267 Insolvency Act 1986 are made out, namely there is an unsecured debt for a liquidated sum in excess of £750 payable to the petitioning creditor, either immediately or at some certain future date, and the debtor appears either to be unable to pay the debt or to have no reasonable prospect of paying the debt and there is no outstanding application to set aside the statutory demand.


How do you know whether a debtor appears unable to pay his debts?


A debtor is deemed to appear to be unable to pay his debts:


if a creditor, by assignment or otherwise, to whom the debtor is indebted in a sum exceeding £750 has served on the debtor a statutory demand in the prescribed form requiring the debtor to pay the debt or secure or compound it and the debtor has for three weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor or set the demand aside; or


if execution or other process issued on a judgment, decree or order of any court in favour of the creditor against the debtor is returned unsatisfied in whole or in part.


The court will not make a bankruptcy order unless it is either satisfied that


98 November/December 2010


the debt, which is immediately payable, has not been either paid or secured or compounded or that the debtor has no reasonable prospects of paying the debt will be paid when it falls due.


Can you still bankrupt him if the debt is not immediately payable?


Where the debt is not immediately payable, a debtor is deemed to appear unable to pay his debts if a creditor to whom the debtor is indebted in a sum exceeding £750 has served on the debtor a statutory demand in the prescribed form requiring the debtor to establish to the satisfaction of the creditor that there is a reasonable prospect that the debt will be paid when it falls due and the debtor has for three weeks thereafter neglected to comply with the demand or set the demand aside.


Are there any circumstances in


which a court might refuse to make a bankruptcy order?


The court may dismiss the petition if


it is satisfi ed that the debtor can pay all his debts or that the debtor has offered to secure or compound his debts, that had the offer been accepted the petition would have been dismissed and that offer has been unreasonably refused: section 271(3) Insolvency Act 1986. A debt is undisputed unless there is a dispute on a substantial ground and you will not be allowed to take points that have already been taken on an application to set aside a statutory demand. Jurisdiction points are to be taken at this stage rather than at an application to set aside the statutory demand.


Business Money


What if you have got a charging order but still want to make him bankrupt?


A petition may be brought on an secured debt provided that the creditor is willing to give up his security or if the petition is to be brought on the unsecured part of the debt and the secured part is valued. Section 269(1) Insolvency Act


1986 and Zandfarid v BCCI [1996]. Whilst no equivalent provision for waiving security for the purposes of a statutory demand, the act is to be read as a whole and should be interpreted as being possible: Re Bartram [2010] unreported.


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