Chapter 5Non-corporate organisations – sole traders and partnershipssociety forbidding it to pay the debt to the debtor, Fred,
and requiring a representative of the bank or building
society to attend before the court to show why the
money in the account (or according to the order per-
haps part of it) should not be paid to the creditor. The
order is served at least seven days before the next court
hearing on the matter and, if at that hearing no reason
has been shown as to why the payment should not be
made to the creditor, the court may make an order
requiring payment by the bank or building society to the
creditor. The creditor, in order to use these proceedings,
must be a person who has obtained a judgment from the
court that the relevant debt is owed to him.
Charging order
This order prevents Fred from selling property over
which it is made, e.g. a house, land, business premises
and any shares Fred may hold, until the creditor is paid.
The creditor will have to wait for the money until the
property is sold but can ask the court for an order to
force Fred to sell.
Getting a third-party debt enforcement order or a
charging order can be complicated and the creditor would
normally require the help of a solicitor.
We will now consider the situation where for some
reason or another the creditor has been unable to get his
money and turns to the ultimate procedure – to make
Fred bankrupt.
Debt enforcement: reform
The Tribunals, Courts and Enforcement Act 2007 received
Royal Assent on 19 July 2007. It will improve the working
of the system of tribunals by providing a new statutory
framework, offices and bodies that will deliver improve-
ments in services to those who use tribunals.
Of particular interest to business are the provisions
relating to debt as follows:
Part 3unifies existing bailiff law relating to enforcement
by seizure and sale of goods and replaces the existing law
of rent distress by seizure of the tenant’s property with a
modified regime for recovering rent arrears in the com-
mercial property sector.
Part 4contains measures to help creditors with claims in
the civil courts to enforce their judgments, including a
new court-based scheme to help the court gain access to
information about the judgment debtor on behalf of the
creditor.
Part 5contains measures to provide debtors who are
unable to pay their debts with relief from enforcement
and discharge from their debts. There are also non-
court based measures to help over-indebted persons and
those with multiple debt situations to manage their
indebtedness.Bankruptcy procedure – generally
Bankruptcy procedure is set out in the Insolvency
Act 1986 as amended by the Enterprise Act 2002. Bank-
ruptcy proceedings, which involve asking the court for a
bankruptcy order, may be taken against Fred by cred-
itors. Fred may also take proceedings to make himself
bankrupt if he cannot pay his debts. His affairs will then
be taken over by an insolvency practitioner, who is usu-
ally an accountant.
This may be a great relief to Fred if, as is likely, he
is being pressed and harassed to pay debts he cannot
meet. On bankruptcy his creditors will have to press
the insolvency practitioner to pay. He is, of course, an
independent person and a lot of the nastiness goes out of
the situation once he takes over from Fred.
In particular, those who supply services to Fred’s home- such as electricity, gas, water and telephone – must
treat him as a new customer from the date of the bank-
ruptcy order and cannot demand settlement of outstand-
ing bills as a condition of continuing supply. They can,
however, require a deposit as security for payment of
future supplies.
The petition
A petition to the court for a bankruptcy order may be
presented by a creditor or creditors only if:
1 The creditor presenting it is owed £750 or more (called
the bankruptcy level) by Fred. Two or more creditors
(none of whom is individually owed £750) may present
a joint petitionif together they are owed £750 or more
by Fred, as where A is owed £280 and B £600.
2 The debt is defined as a debt now duewhich Fred
appears to be unable to pay, or a future debtwhich Fred
has no reasonable prospect of being able to pay.