Partnership Insolvency
A Bankruptcy Order can be made by the Court on the petition of any creditor owed £750 or more by the partnership. Often the petition will also include a petition to wind up the partnership at the same time as the individual partners are made bankrupt. Even if the partnership is not wound up, it will automatically be dissolved by virtue of the bankruptcy of one of the partners.
Upon the Order being made all assets of the bankrupt partners automatically ‘vest’ in the Official Receiver and subsequently in any trustee in bankruptcy appointed by the creditors or the Secretary of State. This includes ‘personal’ assets such as the matrimonial home and motor vehicles. If the value of the bankrupt’s interest in the matrimonial home is more than £1,000, the debtor’s interest in it must be realised by the trustee within three years. If no agreement can be reached with the bankrupt or a third party to purchase that interest, the trustee will apply to Court for an Order for Possession and Sale of the Property.
Since the introduction of the final provisions of the Enterprise Act in April 2004 bankruptcy now usually lasts for a maximum of twelve months, and often less.
There are various restrictions placed on an un-discharged bankrupt and the bankruptcy is also advertised in newspapers in the locality of where the bankrupt traded.
If there are sufficient assets available, not only will all creditors be paid in full with statutory interest from the date of the bankruptcy until they are paid, but the bankrupt will also be expected to pay from the estate, the costs of the petitioning creditor, the Official Receiver, the trustee and Department of Trade fees calculated at 17% of all realisations in excess of the first £2,000.
Therefore a bankrupt with assets may wish to consult with a Licensed Insolvency Practitioner early on, in order to ascertain whether or not an IVA would be more suitable. It is not too late to enter into an IVA after bankruptcy providing the debtor is still un-discharged. An IVA cannot be entered into post discharge in respect of Bankruptcy debts. It is however considerably more costly after a trustee has been appointed and therefore the earlier advice is sought, often the cheaper it is.