Defending a bankruptcy petition

The bankruptcy process

Bankruptcy is a legal process by which you (the debtor) choose to or are forced to declare that you cannot repay your unsecured debts.

Before a creditor can present a bankruptcy petition to the Courts, they are usually required to send you a document called a statutory demand. The statutory demand should set out the creditor’s alleged claims against you, the amount owed and the consequences of not complying with the 18-day time limit (time limits are slightly longer if you are not based in England or Wales).

When you receive the statutory demand, you have a few options available to you, namely:

1. Pay the debt;
2. Attempt to negotiate a settlement with the creditor; or
3. Apply to set aside the demand if the debt is disputed.

If you dispute the debt, either based on its existence, its nature or the amount, it is important that you apply to have the statutory demand set aside within the time limit to prevent a bankruptcy petition being brought against you. If you do not apply to have it set aside, the creditor can present a bankruptcy petition to the Court after 21 days.

Once you have been served with a bankruptcy petition, you can no longer apply to set aside the statutory demand. Instead, you must file a ‘notice of opposition’. This should be done at least 5 business days before the bankruptcy hearing.

At the hearing, a judge will determine whether to make a bankruptcy order. It is generally advised that you instruct a solicitor and/or counsel to appear on your behalf at the hearing. However, should you choose to do so, you can also represent yourself.

Grounds for defending a bankruptcy petition

A bankruptcy petition can be challenged on a few grounds, including but not limited to the following:

1. The debt is genuinely disputed on substantial grounds;
2. The debt has a genuine counterclaim or cross claim which is more than their debt;
3. That there has been a contravention of the rules governing bankruptcy; or
4. The Court does not have jurisdiction 

The Court may also dismiss the petition if it is satisfied that you are able to pay all of your debt or is if it is satisfied that the Creditor unreasonably refused a reasonable offer of repayment.

It is important that, when relying on any of the above grounds in a notice of opposition, you provide evidence to back up the point(s) you are relying on.

Please note that individual circumstances vary greatly and that this blog is not intended as a substitute for legal advice. If you have been served with a statutory demand, or a bankruptcy petition, please contact us on 0121 355 0011 for a free, no obligation conversation to see how we may be able to assist you.