Hearing the creditor's petition part 2

Once the petition has been issued then other creditors or alleged creditors can give notice of intention to appear under insolvency rule 6.23. They have to give notice to the petitioning creditor by not later than 4 PM on the business day before the hearing. That notice has to specify the amount and nature of the debt said to be owed to such creditor, the name and address of the person giving the notice (including a telephone number and reference for communication either with that person or any person specified in the notice as authorised to speak or act on the alleged creditor's behalf) and whether the creditor's intention is to support or oppose the bankruptcy petition. If such a notice is not given then the person may appear on the hearing of the petition only with the leave of the court. In consequence the petitioning creditor draws up a list of creditors specifying whether they support or oppose the petition.

In addition to being able to make an order dismissing a petition, or granting the petition, the court can adjourn it but it can also substitute the petitioner in the following circumstances. The first set of circumstances arise under section 6.30. A petitioning creditor may be found not entitled to petition. (For example it may be found that such person is not a debtor). A petitioning creditor may fail to turn up to support the petition. The petitioning creditor may also consent to withdraw the petition or allow it to be dismissed. (The debtor may belatedly have paid the debt and the creditor's costs). Alternatively the petitioning creditor may appear yet simply not ask for an order. In any of those circumstances a creditor who wants to prosecute the petition and has given notice under rule 6.23 can be substituted on such terms as the court thinks just, providing such creditor satisfies the following criteria. That is that when the petition was presented a creditor would have been in a position to present a petition in the sense of satisfying the criteria set out in the Insolvency Act Section 267 (2) (debt above the bankruptcy level etc). There are similar powers to change carriage of the petition under rule 6.31.

Obviously in respect of any substituted petition the debtor still has all of the potential defences available in relation to that particular debt and in relation to those matters referred to in last week's article as being defences to the bankruptcy.

If the court decides to make person bankrupt bankruptcy commences on the day on which the bankruptcy order is made (Insolvency Act section 278). This can be contrasted to the position in relation to companies. With a company if a winding up order is made then the winding up is deemed to have commenced at the time of presentation of the petition, whereas with an individual it is when the order is actually made. That of course has significant consequences as regards transactions in the interim.

If someone is made bankrupt then their bankruptcy lasts until it is discharged. The ordinary period to discharge is one year after commencement of the bankruptcy. Of course discharge from bankruptcy, whilst it means that the individual is no longer a bankrupt (and therefore not subject to the disabilities arising from bankruptcy such is inability to act as a company director etc) it does not affect the running of the bankruptcy itself in the sense that those assets which went into the bankruptcy remain in the bankruptcy. Bankruptcy frees you from the debts, but also means in general terms you lose the assets. The discharge of the bankruptcy does not mean that you get the assets back. Next week considers further the impact of discharge from bankruptcy

It is however possible that discharge from bankruptcy can occur even earlier. That is if before the end of the year the official receiver files with the court a notice stating that investigation of the conduct the affairs of the bankrupt under section 289 of the Insolvency Act is unnecessary or concluded. In that case discharge occurs when the notice is filed. It is also possible that the discharge will be postponed. That will only happen if the official receiver or the trustee in bankruptcy applies to the court for the period to cease to run until either a set date or fulfilment of a specified condition. The court will only make the order if satisfied that the bankrupt has failed or is failing to comply with an obligation placed on him under the Insolvency Act 1986.