LATEST LAW IN 59 SECONDS (with a bit more 'cos I'm a lawyer)

Click on my video for the latest legal developments and tips. I promise it won't hurt.

INSOLVENCY TO GET MORE EXPENSIVE

If your creditor is threatening to bankrupt you personally or wind up your company, try and ward off proceedings until 01 November 2022 at least. That's because these insolvency cases started on or after that date will cost them substantially more and  the prospect of laying out this extra money without any guarantee that proceedings will yield a penny, may not appeal to them.

How much more? The deposit the creditor must pay on account of Insolvency Service fees - and this is in addition to the court fee - jumps from £990 to £1,500 for bankruptcy and from £1,600 to £2,600 for winding up. The Insolvency Proceedings (Fees) (Amendment) Order 2022 (SI 2022/929) is to blame.

And if you are the creditor and intent on bringing proceedings, PULL YOUR FINGER OUT and escape the increase.

Applications by debtors for their own bankruptcy are unaffected.

ESCAPING DEBT: Bankruptcy alternative CHANGES: England & Wales

If you are insolvent - what you owe is more than what you own - you can seek your own bankruptcy or wait for a creditor to do it for you. There are advantages and disadvantages to bankruptcy which I fully examine in the new edition of Breaking Law. The big advantage is that, generally, you are automatically released from your debts after one year.

There's an alternative to bankruptcy. It's a debt relief order and is easier and cheaper (just £90) to obtain. You seek it from the Insolvency Service through an approved debt advice intermediary such as the CAB. And it works in basically the same way as a bankruptcy.

The conditions for qualifying for a debt relief order are changing on 29 June 2021. The main change is that you can owe more to qualify. Currently, you are out if your debts come to more than £20,0000. That figure is rising to £30,000. No, DO NOT ratchet up another ten grand on your credit card tomorrow afternoon!!!

You are also currently out if your assets are worth more than £1,000. That figure is increasing to £2,000. But say you own a car? Up to £1,000 of its value is disregarded in totting up the value of your assets. From 29 June 2021, that £1,000 is doubling to - altogether now - £2,000. 

And one more change. You are also currently out if your surplus income comes to more than £50 per month after tax, national insurance and normal household expenses are knocked off. That figure is rising to £75.

An alternative to the alternative ((!) is an administration order from the county court. You can only go for that if your debts do not exceed £5,000. There the court can order you to make repayments over a period  of time but can also reduce the amount you owe. 

COVID-19: Insolvency Cases: Temporary Directions: England & Wales

A temporary practice direction was issued on 6 April 2020 relating to insolvency proceedings in England and Wales which is set to last until 1 October 2020 but is likely to be revised before then. You'll find it at https://www.judiciary.uk/wp-content/uploads/2020/04/Temporary-IPD-April-2020_.pdf

Enjoy - and stay solvent.

Court Fee Refund Scheme Announced

Around eighteen months ago, the Ministry of Justice coughed that some litigants had been overcharged the court fees they were being made to pay for taking certain steps in civil and insolvency cases. I told you about it in this blog and and what to expect at -

http://www.breakinglaw.co.uk/search/label/court%20and%20tribunal%20fees

On the basis that it is better late than never, the promised refund scheme was  announced a few days ago and is now up and running. If eligible, you can make your refund claim on a special form which you can access along with guidance at https://www.gov.uk/guidance/claim-a-court-fee-refund  Interest on the amount refunded will be paid at the grand rate of 0.5%.

The relevant fees must have been paid between 22 April 2014 and 31 March 2018 and the most common overcharges are likely to have been on issuing  certain insolvency applications and asking for Court of Protection bills of costs to be assessed.

But in so far as the overcharge in issuing a county court claim for the stage 3 procedure under either of the two pre-action protocols for low-value personal injury cases is concerned, the refund scheme notably overlooks these. They are still being considered. Don't hold your breath.

Bankruptcy Win After Offer To Settle Refused

Recently, I bought you The Pointless Bankruptcy - how you as the debtor might successfully argue that the bankruptcy petition against you should be thrown out because you 'aint got a bean. 
(see http://www.breakinglaw.co.uk/search/label/bankruptcy)

Now, without my arms leaving my body, I bring you The Failure To Accept A Reasonable Offer Bankruptcy. Under section 271 of the Insolvency Act 1986 the court has a discretion to dismiss a bankruptcy petition if the debtor has made an offer to the creditor to secure the debt and that offer has been unreasonably refused.

In a case just before the High Court *, the debtor owed school fees. She offered to the school to pay the fees by instalments PLUS interest at the rate of 3% PLUS security over a property by way of  charge  (so that the property could not be sold while the debt was still outstanding without the debt being paid off and, if necessary, the school would have been able to get the property sold and taken what was due to it out of the proceeds). But the school said it would only accept the offer if the debtor also paid its debt recovery costs. The debtor refused to go along with this requirement because she maintained she wasn't under any  legal obligation to pay those costs.

The school petitioned for the debtor's bankruptcy. The court, on an appeal, threw out the petition on the basis the the offer had been unreasonably refused and that the debtor had had a genuine ground for disputing the claim for debt recovery costs. The judge stated that a reasonable hypothetical creditor would have accepted the offer and that was the test as to its reasonableness.

* Boulton v Queen Margaret’s School York Ltd [2018] 10 WLUK 490

Pointless Bankruptcy Petitions: How To Combat

You are on a low or no income. You have no assets. Nobody owes you money. You have no relatives or friends or those you have are in the best of health or financially as bad or worse off than you so there is no prospect of inheriting from them should they imminently expire. 

And you owe council tax. The council can't bring bankruptcy proceedings against you unless the debt is for at least £5,000. No creditor can: the £750 limit has been raised. But say you do owe £5,000 or more? 

The debtor in Lock v Aylesbury District  Council Ch Judge Hodge QC 9 July 2018 owed £8,067. She was living in social housing and dependent on financial support from her daughter. There was no satisfactory evidence that she had any present or prospective assets that could be realised if she was made bankrupt and there was nothing to indicate that any investigation of her affairs by the Official Receiver would bring anything to light. The bankruptcy order which had been made against  her was quashed. It was pointless.

The judge ruled that where a bankruptcy petition was based on unpaid council tax, there was a burden on the council to show that, on the face of it, a bankruptcy would achieve some useful purpose. 

There is no reason why a 'pointless' argument should not  be advanced by a debtor in respect of some other kind of debt in an attempt to avoid bankruptcy.

For much, much more on bankruptcy, see my book Breaking Law. It won't bankrupt you! 

For Insolvency Anoraks Only

An amended Practice Direction for insolvency cases came into force on 4 July 2018. It widens the jurisdiction of county court hearing centres which can deal with insolvency work. But only just. Ordinarily staying put at one of these centres will be opposed and unopposed applications to set aside a statutory demand; unopposed company winding up and bankruptcy petitions; applications for income payment orders; public and private examinations; possession claims and claims under the Trusts of Land etc Act 1996;; charging order applications and their enforcement in insolvency cases; applications for debt relief orders; and a few other bits and pieces. Note that opposed bankruptcy petitions will have to be transferred out.

So who gets the business that cannot be retained by these hearing centres? On the South Eastern circuit it will be the County Court at Central London. Elsewhere it will be  a hearing centre located at a Business and Property Court on the same circuit or one of the specialist centres on the same circuit. Those specialist centres are currently at Brighton, Croydon, Medway, Preston and Romford.

When the case is transferred out a specialist judge at the transferee court is to take a look at the papers as soon as possible and decide where the case can most fairly be decided. The written representations on this from the judge who transferred and from the parties are to be taken into account. The case could even be sent back from whence it came!

The danger is that debtors against whom bankruptcy proceedings have been brought will more readily lodge their opposition to the proceedings and thereby earn perhaps a couple of months of valuable time while the case finds its resting place during which they will hope to gather together another money to pay off the creditor. We shall see. 

Statutory Demands: New Rules

You may only be interested in this if you are a lawyer doing insolvency work or a debtor trying to prevent your creditor from making you bankrupt (and remember that no creditor can now do this unless the amount of the debt is at least £5000 although you can apply for your own bankruptcy owing less).

Bankruptcy proceedings cannot generally be launched unless the creditor has previously brought a form called a statutory demand to the debtor's attention. That must allow the debtor 21 days to pay up after which a bankruptcy petition can be issued and 18 days to apply to the court to set it aside because, for example, the debt is disputed or the debtor has a cross-claim against the creditor. 

On 8 December 2017 the procedural rules dealing with statutory demands are amended by the swingingly entitled Insolvency (England and Wales) and Insolvency (Scotland) (Miscellaneous and Consequential Amendments) Regulations 2017 SI2017/1115. They say that the court can refuse to issue a bankruptcy  petition if it is not satisfied that the creditor has discharged their obligation to do all that is reasonable to bring the demand to the debtor's attention. Personally handing the demand to the debtor is the usual and best way of satisfying the obligation but very, very, very, very occasionally  (I don't think) that is not possible because the debtor just happens to be hiding away from their creditor. 

The other statuary demand changes require the periods shown on the demand for paying up and applying to set aside to be extended when the demand is being served outside England and Wales. If this is not done, the demand could be invalid.

There's plenty on bankruptcy - avoiding it, pursuing it and coping with it - in my book Breaking Law.

INSOLVENCY LAW CHANGES

This is for insolvency law anoraks and anyone wishing to avoid reading 444 pages of the Insolvency (England and Wales) Rules 2016 SI 2016/1024. They come into force on 6 April 2017 along with parts of the Small Business, Enterprise and Employment Act 2015 and the Deregulation Act 2015, the net result being -

• replacement of the Insolvency Rules 2016.
• modernisation of insolvency practice and procedure.
• permission to a liquidator and trustee in bankruptcy to pay out a creditor who is owed no more than £1,000 without the need for them to submit a formal claim so that reliance can be placed on the company's or bankrupt's statement of affairs or account records as to how much is owed and to whom.
• makes the official receiver the trustee of the bankrupt's property as soon as a bankruptcy order is made (unless the court appoints the supervisor of a failed voluntary arrangement as trustee which it is empowered to do).
• abolishes the final meeting of creditors.
• removes meetings as the default mechanism for liquidators and trustees seeking decisions from creditors.

Wake up. It's time to go to bed!  

Bankrupt? What Happens to the Car

When it comes to bankruptcy, some consequences are nice and others are not so nice (see Breaking Law at chapter 35 - and if you haven't bought the book yet, doing so will not bankrupt you). 

One of the nice - and merciful - consequences is that you get to keep property which is necessary for you to use in your work or business. And that may well include a vehicle although if the vehicle is valuable your trustee in bankruptcy (the official receiver or whoever) may require you to replace it with a cheaper alternative.

But say the vehicle is on HP? The Court of Appeal ruled on what was to happen in that situation in a case last Friday*. The HP agreement will almost certainly provide that if you are made bankrupt then the finance company can terminate it and repossess the vehicle and if the agreement said anything else or it did not repossess then I would eat another of my wigs! However, the agreement could well have  a benefit to someone other than the finance company because the value of the vehicle might well exceed what the finance company is owed? Who would be entitled to that excess if the vehicle was a tool of your trade? According to the Court of Appeal, not you but your trustee in bankruptcy, for the benefit of your creditors. 

* The case is called Mikki v Duncan [2016] EWCA Civ 1312 

SURVIVING CREDIT CARD DEBT

The amount of debt owed by consumers on credit cards is at an all time high. That's what is revealed by Bank of England figures just published

Do bear in mind that the law protects you against harassment by your creditors and they include banks and other financial institutions who have issued you with a credit card. In Breaking Law (chapter 12) I advise what you can do when your creditor goes too far in trying to persuade you to pay over money you owe. I tell the story of a customer of the Royal Bank of Scotland plc who was in debt to it. Although she had made it plain that she did not want to speak to the bank, they spoke or attempted to speak to her over the phone on 547 occasions. She was intimidated by this pressure.In 2013 the Court of Appeal upheld a £7,500 award to her for the harassment she had suffered.

And if your creditor will not accept a debt management plan under which you pay a monthly sum which is shared among your creditors in proportion to how much each is owned, there are other options for you. The ultimate one is to ask for your own bankruptcy or invite your creditors to bankrupt you. Remember, though, that no creditor can have you made bankrupt unless you owe them at least £5,000. The old figure was £750. Much more in Breaking Law. 

INSOLVENCY RULES, OK!

They've been threatened for a long time and now they have arrived - today. The Insolvency (England and Wales) Rules 2016. But before you get carried away by excitement, I have to tell you that they will not be  coming into force until 6 April 2017. 

To be turned on by the new rules, you really need to be a lawyer, insolvency practitioner, official receiver, planning to go down the financial pan, very boring or devoid of a television set. They consolidate the Insolvency Rules 2016 and a cool set of 28 pieces of legislation which amended them. But they do much more. They restructure, take account of modern methods of communication and update language. One of my favourite changes - small but I love it - is to allow anyone owed less than £1,000 to be paid a dividend out of the assets of a liquidated company or a bankrupt individual without having to make a formal claim.