There are three routes out of bankruptcy depending on your situation:
- Recall by the Accountant in Bankruptcy (AiB)
- Recall by the Court
- Reduction by the Court
Recall by the AIB
Since 2016 it has been possible to make an administrative application for recall by completing what is known as a “Form 1” and submitting this to the Accountant in Bankruptcy on the basis that you are able to pay your debts in full.
In our experience recall by the AiB is best treated as a collaborative process, where you engage with your Trustee in Bankruptcy and your creditors before submitting the application, so that the process is consensual and as such has the highest likelihood of success.
Upon submission of an application for recall your Trustee must prepare and send to the AiB a statement of affairs reporting their views on your bankruptcy. The AiB then considers the relevant papers and will grant recall if it is satisfied you can pay your debts in full. There is no time limit imposed on the AiB to make its decision. A fee of £100 is payable on the decision being issued.
Recall by the Court
Applications to the court are restricted and it is not permissible to seek recall by a Sheriff if the only basis is that you are able to pay your debts.
Recall by the court therefore seems likely to us to be limited to situations where an error has occurred. A possible scenario might be that you received the court paperwork and instructed a Solicitor to act, whilst at the same time making an application for a Debt Payment Program under the Debt Arrangement Scheme but for whatever reason your Solicitor did not appear at the relevant court date and your bankruptcy was granted in absence of any representation.
So far as we are aware there has been no recent case law regarding such applications and seems to us that there would need to be a very good and properly evidenced basis for such applications.
It is important to be aware that in relation to both types of recall, that whilst it largely puts you back in the position you would have been but for the bankruptcy being granted, it does not mean it is as if it had not occurred, nor does it remove details of your insolvency from the public registers.
Reduction
Reduction is the only method which means it is as if sequestration has never been granted. However, it is only applicable in certain rare and particular circumstances. An example might be where an individual was wrongly made bankrupt for debts due by another party, such as a company they ran.
You can only take advantage of reduction if it is the only remedy available to you and you are able to prove clearly that a serious error has been made for which another is responsible and of which you were unaware.
Reduction requires a petition to the court supported by appropriate evidence which means the expense tends to be significantly higher than a recall.
If you feel you have been made wrongly bankrupt and would like an initial discussion about the position and your options, please contact our insolvency specialist.
