How can I annul a bankruptcy?
Bankruptcy can severely restrict the bankrupt individual’s personal and business life, sometimes with devastating impact.
Overall, the key aim is to ensure creditors can be repaid at least some of what they are owed from the debts that subsisted at the time which the bankruptcy order came into effect.
In some instances, a bankruptcy order should never have been made in the first place, in which case you can apply to have it annulled.
In other cases, the bankrupt individual’s debts may have been repaid in full post-order. In this case, is understandable that the individual will want to return to business and a level financial footing as soon as possible – they will want to be returned to their position as if the order had never been made.
If you are subject to a bankruptcy order and need advice on whether you can have your bankruptcy annulled, please get in touch with us to discuss your circumstances.
Bankruptcy restrictions
An individual who has been formally declared bankrupt by the court is automatically subject to various restrictions. Specifically, you cannot be involved in the creation or management of a business (e.g. as a director) without the court’s express permission and you must inform any prospective lender if you want more than £500 in credit or loans.
If you breach these restrictions, you could face prosecution and further restrictions could be imposed.
But if, during the bankruptcy period, your debts are paid off (including the costs of bankruptcy) or they have been guaranteed by a third party, there may be little practical reason for the order to remain in place.
Annulment
In certain circumstances, you can apply to annul and cancel the bankruptcy – putting you back into your original position. You will need to satisfy the court that:
- The bankruptcy order should not have been made – this requires more than arguing that the order was not fair or reasonable. There must be tangible evidence of a mistake or defect that led to an order that should not have been made in the first place.
For example: your total debts were less than the £500 threshold for an order to be made
OR
- All your debts and bankruptcy fees have been paid, guaranteed by a third party or there is an Individual Voluntary Arrangement (IVA) in effect (agreed by your creditors) to pay your debts.
You will also be required to pay the statutory fees of the trustee/official receiver. Presently these are £10,500.
NB: repayment of the debts cannot be by way of loans, though it may be by way of gifts from third-parties.
You will likely be expected to have an interview with the trustee/official receiver handling your bankruptcy and they will in turn need to report to the court that the debts have been repaid (or guaranteed). You will be required to attend the court hearing and to bear all the costs of the hearing.
The court can, if satisfied with your application, make an annulment order which will end the restrictions on you. However, it is important to note that there is no guarantee of success - it remains within the court’s discretion whether or not to annul a bankruptcy order.
Automatic discharge
If annulment is not an option, you can usually expect to be automatically discharged from bankruptcy after 12 months following the bankruptcy order.
What happens next?
When a person has been made bankrupt, it is publicised in the central Individual Insolvency Register and (if you are a property owner) a notice added to the registered title at HM Land Registry.
If your bankruptcy order is annulled, we can arrange to have the Land Registry notice removed. In principle, the details of your bankruptcy in the insolvency register will be removed within 3 months of full repayment of debts (or when an IVA has been agreed).
How we can help
The most effective and conclusive way to move out of bankruptcy is to have it annulled if the criteria are specified.
Our specialist Commercial Litigation team supports insolvent and bankrupt individuals. For prompt advice, please get in touch with Samuel Pedley or Reuben Grimshaw at mfg Solicitors. You can call the firm via 01562 820181 or get in touch by email to samuel.pedley@mfgsolicitors.com / reuben.grimshaw@mfgsolicitors.com.