In the UK, a debt of £5,000 is the minimum needed to serve a Statutory Demand on an individual.
If ignored, this leaves you with the option to start bankruptcy proceedings.
So, what is a A Statutory Demand?
It’s an official document that serves as a notice to the debtor, (the person that owes you, or your company, money).
Once registered, a Process Server is hired to serve (or sub-serve) notice on the debtor.
Once served, it gives the defaulting party (your Customer, or ex-Customer) 21 days to come up with the funds to clear the debt they owe.
Bankruptcy against an individual
If you are unable to come to an agreement with your debtor, be it a sole trader, or someone who has signed a Personal Guarantee Agreement (usually on behalf of a limited company),
… and you feel that there is no further movement, then the next step could be to petition for their bankruptcy.
Fees to manage their bankruptcy currently come to around £1,270 (£990 petition deposit & £280 for court costs)
Given that the process in itself is an arduous one, the Courts would ask that there are currently no other petitions pending for the bankruptcy of this individual.
And/or that certain Court documents are filled out for the individual, or an authorised representative petitioning for the bankruptcy of the debtor in question.
What if the bankruptcy is contested?
Depending on the findings of the Courts, the bankruptcy can be annulled.
If the person adjudged bankrupt can show that they can clear the debt over a shorter period of time …
… or enter into an IVA (Individual Voluntary Arrangement), then it’s likely that the Appointed Chairman will agree to this.
What comes after Bankruptcy
Even if one decides to petition for bankruptcy, it’s likely that for someone who doesn’t have too many debts (say below £30/40k) then the bankruptcy period would be around 1 year.
After that, the person will still have some restrictions, but would have a clean slate to re-apply for credit, etc.
A change in the legislation means that individuals no longer have to wait for up to 6, or 7 years before they are no longer adjudged as ‘bankrupt’.
When should you avoid petitioning for someone’s bankruptcy.
1) It’s worthwhile doing a rigorous check to see if all angles have been covered in terms of communication.
2) Take along a decision maker, or arrange for someone to attend meetings with you to portray your case to the other side.
3) Forget the old thought that the only way of getting any funds out of individuals is to bankrupt them.
4) How sure are you that the fixed and current assets that your debtor possess are enough to clear down your debt?
5) If your debtor is citing cashflow problems, how sure are you that bankrupting them is the only step to take?
If you need some more guidance on whether or not bankruptcy is the way to go for yourself or your debtor, don’t hesitate to get in touch.
Tel: 0208 088 4565
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