If you are owed money by an individual or a partnership and your debt exceeds £750.00 then you may wish to consider issuing bankruptcy proceedings against that particular debtor if they are unable to pay your debt.
A creditor’s bankruptcy petition should only be considered for undisputed debts. If your debt is disputed or likely to be disputed in whole or in part, regardless of whether you think such a dispute has any merit, then it is advisable to first obtain a judgment against the debtor and then issue a bankruptcy petition (see the "Commercial Litigation" and Suing and Being Sued” sections of our website for more information). If you attempt to issue bankruptcy proceedings against a debtor in respect of a disputed debt then you face the risk of the debtor making an application to the High Court to set aside your proceedings. If a debtor succeeds in such an application then it is likely that you will have to reimburse the debtor the legal costs which they incurred in having to make such an application as well as having to discharge your own legal costs. This could easily run to several thousand pounds.
Whilst the financial threshold for a creditor’s bankruptcy petition is for debts in excess of £750.00 we would normally advise creditors that a bankruptcy petition should not be issued in respect of debts of less than circa £5,000.00. A creditor’s bankruptcy petition is an expensive process and whilst the debtor can be potentially liable for these costs, the primary responsibility for same will be the creditor who can then seek reimbursement from the debtor at a later stage.
A petitioning creditor’s legal costs are normally recoverable from a debtor once the petition has been served without the debt being paid. If a petition is dismissed, which usually occurs if the debtor discharges the petitioning creditor’s debt before the hearing, then a creditor should expect their legal costs to be in the region of £1,200.00. If the petition is not dismissed and the Court makes a bankruptcy order against the debtor then the petitioning creditor should expect their legal costs to be in the region of £2,000.00. A creditor should therefore only issue a bankruptcy petition if they are prepared to have the debtor adjudicated bankrupt and in doing so incur the significant costs associate with same.
A creditor’s bankruptcy petition is normally commenced by issuing a statutory demand, which is essentially a formal demand requiring payment within 21 days, after which time a bankruptcy petition can be presented. We have a vast experience in assisting creditors in issuing bankruptcy proceedings against their debtors and we have administrative procedures in place in our office which allow us to act on your instructions immediately and progress your case through to a hearing efficiently and without delay. If you are owed money by an individual or a partnership then please contact our insolvency department to discuss whether issuing a creditor’s bankruptcy petition is an appropriate way for you to proceed.