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Bankruptcy Case Studies In Respect Of "Protective
Steps"
Background
Philip and Lucy are a married couple.
They own their own home and their combined equity is worth
£20,000 with Philip's half share being £10,000
Philip is self employed as a plumber. He has no business equipment
except for small tools. Philip has accumulated Inland Revenue,
VAT and trading crediitors of £50,000.
Solution - House
Prior to petitioning for bankruptcy it
would be sensible for Philip and Lucy to contact an Insolvency
Practitioner (IP). That IP would arrange to have the house
professionally valued to confirm, or otherwise
that Philip's share of the equity was £10,000. Lucy
then raises £10,000 to buy out Phillip's share in the
property.
Clearly it is far easier for Lucy to
raise the £10,000 ahead of Philip's bankruptcy than
afterwards. After the bankruptcy credit reference agencies
would have a note of the bankruptcy and would be more reluctant
to lend.
The £10,000 is then held intact
by the IP and post bankruptcy is paid to the Official Receiver
(less the costs of the IP).
Solution - Business
On the making of the bankruptcy order,
Phillip has a duty to deliver the books and records of his
business, for the two years prior to the bankruptcy order,
to the Official Receiver. This will have the effect that the
business will be difficult to continue without the previous
records.
There is nothing in law, however, to
stop a bankrupt from trading as a sole trader. For details
on restrictions in trading in bankruptcy, see JOB.
Comment
Like all things in life if you take early
advice and follow that with prompt action you can achieve
the most favourable result for your families benefit.
In the above case study you can imagine
the difficulty Lucy may have had in raising £10,000
after her husbands bankruptcy. If she failed to raise the
£10,000 within one year of Philip's bankruptcy the Official
Receiver (or trustee) would then sell the property! Half of
the equity raised would then be handed to Lucy.
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