When you realise you are potentially in a position where you or your company is insolvent you will need to take action as soon as possible. It is sadly not uncommon for corporate and personal insolvency to be bedfellows, but they are different so you will need to make sure you are approaching it from the right perspective. One of the very early discussions we often need to have with our clients is the difference between their personal and corporate financial responsibilities. Kym Carvell explains how to answer the question ‘what is personal insolvency’ and the difference between that and corporate insolvency in this video. She also discusses some of the confusion surrounding the liability status of sole traders and the common reasons why some companies can become insolvent.
Paying by card – know your rights!
Research by the UK Cards Association showed that, in 2016, 77% of national retail sales were made by card. It was also announced in the last few days by the British Retail Consortium that debit card payments overtook cash for the first time, no doubt increased by the use of contactless payment.
Most payments by credit card (including some charge cards) are protected by law: consumers have a legal claim against the card issuer where the goods or services cost between £100 and £30,000 and are not delivered.
In addition, for debit and credit cards (including pre-paid cards), the card schemes provide a system of “chargeback”. Chargeback schemes are voluntary schemes with the terms and conditions set by the card issuer and accordingly the rules vary from issuer to issuer. However most schemes allow the card issuer to ask the merchant acquirer to reverse a payment made by card with no minimum or maximum limits.
It is unfortunately inevitable that some payments made for services will not be honoured when a retailer enters into insolvency. New guidance issued to insolvency practitioners states the appointed insolvency practitioner must issue a notice on the retailer’s website informing customers of whether their services or goods will be delivered, as well as informing them of the above rights.
The UK Cards Association has also issued a guide to card holder’s rights, which can be found here:
Can I go bankrupt please?
Every year there are literally thousands of people confronted with debt that reaches a point of being unmanageable, whether through bad luck, an inability to foresee the problem that was looming or, in some cases, other reasons. Until recently, these unfortunate people have been able to petition the court for their own bankruptcy, provided they could afford to pay the petition costs. This is what we refer to as a “Debtors’ own petition”.
However, from 6 April 2016, instead of going to court, individuals wanting to make themselves bankrupt will have to apply on line through a portal on the Government website at GOV.UK. The application fee is £130 (which is £50 lower than the original petition cost) and this can also be paid online. If you pay online the applicant will even be allowed to pay the cost by instalments.
The application will be considered by an adjudicator within the Insolvency Service who must determine whether a bankruptcy order is made within 28 days of the application being submitted. This period could be extended by up to a further 14 days if the adjudicator requires further information before being able to determine the application.
So, what happens on adjudication? There are two options for the adjudicator, namely:
- Agree a bankruptcy order should be made. Upon making this decision the adjudication/application papers are passed over to the Official Receiver who will take all appropriate steps to administer the bankruptcy estate from thereon; or
- The application is rejected. Although it has not been made clear why an application would be rejected, it can be assumed grounds for rejection will include a view an alternative method of addressing the debt problem is better than bankruptcy. This will include procedures such as voluntary arrangements or debt relief orders. However, if rejected, the debtor may apply within 14 days of being notified for the adjudication to be reviewed. Should the review uphold the rejection then the debtor may within 28 days of the review determination apply to court who may make an order they see fit, which may include making a bankruptcy order or dismissing the application.
These changes only relate to debtors’ own petitions. A creditor who is owed in excess of £5,000 may still proceed to petition the court for the debtors’ bankruptcy as before because this procedure remains unaffected by the changes. Equally, the procedure for petitions presented by personal representatives of insolvent estates or partners of insolvent partnerships remain unchanged.
So, why the change? At present, the courts are heavily overburdened and the Government are looking at ways to ease that burden. Encouraging alternative dispute resolution methods (such as mediation or arbitration) is one way. The second has been the reduction of bankruptcy petitions heard by the court. According to Insolvency Service statistics there were 11,423 debtor own petitions filed in 2015 (compared with 4,374 creditor petitions). Therefore, on the face of it, amending rules that remove debtor own petitions from being a court process will remove a significant volume of administrative court time.