Bankruptcy Case studies

Number 1

A bankrupt and his wife are living in the matrimonial home which before the bankruptcy was jointly owned. There is £100,000 of equity which is therefore owned fifty-fifty.

One day a letter arrives out of the blue from the trustee in bankruptcy. It is short and to the point - he has to realise the bankrupt's interest in the property so would they like to buy it from him, failing which he will issue possession proceedings and sell the house and take his half for the creditors. And by the way they have 14 days to reply!

Needless to say they probably realised this would come eventually but when it does it is a real shock and wake up call - the bankruptcy has bitten. The wife is probably in tears and thinking they will be made homeless [which they could] and how could her husband have got them into this mess in the first place etc etc. You can imagine the "fall out".

What should they do?

Now this is precisely the sort of situation we want to be there to advise about.

Every case is different so there is no hard and fast answer. There are quite a few options which they will never have thought of and which the "free" and government advice lines will not go into. As professionals we are not biased - we simply give best advice in the best interests of the client and to try and keep the costs to a minimum.

Number 2

A bankrupt is told by his trustee in bankruptcy that by the time the list of creditors is finalised there will be more than enough assets in the bankruptcy for him to get an annulment – that is to say that the original bankruptcy order can be cancelled. There are conditions though – he has to be able to pay all the remaining creditors, bankruptcy fees and costs. However this may well be possible by raising a second mortgage instead of the matrimonial home having to be sold.

It all sounds pretty good until the trustee advises the bankrupt of the amount of his fees. The bankrupt and his family cannot believe that the total can be so high and wants to know how to find out whether it is reasonable or not and, if it is not, how to get it reduced.

Number 3

A supplier of an important part required for a manufacturing process who was a very large creditor of a company was concerned about the money he was owed for goods already delivered. He went and saw the directors and advised them that they would have to pay him or he would himself be likely to go bust.

At first they were very unhelpful and said that they had just not got the cash flow but when the supplier said that he would quite simply issue a writ and stop supplying the requisite goods which would mean they could not finish any more of their product they agreed to pay him what they owed and furthermore to pay cash on delivery for future orders.

On the strength of this agreement the supplier continued to supply the necessary parts.

Sadly the company went bust within a couple of months. The supplier thanked his lucky stars that he was not a creditor until, that is, the day he received a letter from the liquidator of the company claiming that the money he had been paid was in effect what was known as a voidable preference and as such he was therefore bound to pay it all back.

The supplier was mortified. What on earth should he do?