Annulling a Bankruptcy Order
12th December, 2019
This article explains that a bankruptcy order can be undone and is not necessarily a point of no return should you wish to pursue other methods to deal with your financial issues.
What is an Annulment in Bankruptcy?
A Bankruptcy Annulment is an Order of the Court which has the effect of restoring a Bankrupt individual’s (“the Bankrupt”) position to how it was before the Bankruptcy Order was made. Any assets of the Bankrupt, which could have vested in a their in Bankruptcy, are returned to the ownership of the Bankrupt following an Annulment.
When can an Annulment Order be made and on what grounds?
An Annulment Order can be made any time after the making of a Bankruptcy Order, even after the Bankrupt has been discharged from their Bankruptcy.
The grounds upon which an Annulment Order can be sought are as follows:-
- If it appears that there were sufficient grounds, when the Bankruptcy Order was made, for believing that the Bankruptcy Order ought not to have been made;
- If the Bankruptcy debts, costs and expenses have all since the making of the Bankruptcy Order, been either paid in full, or secured for to the satisfaction of the Court; and
- If an undischarged Bankrupt enters into an Individual Voluntary Arrangement (IVA) with their creditors.
Applying to the Court for an Annulment
The process of applying to annul a Bankruptcy Order broadly takes the following form:
- Completion of an application form.
- Preparation of a written witness statement explaining why you believe that the Bankruptcy Order should be Annulled.
- Presenting the application form and witness statement to the Court who will then set a date for a hearing.
- Notification of the Official Receiver, or any Trustee in Bankruptcy who has been appointed, of the time, date, and place of the Court hearing by providing a copy of the issued application and witness statement to them.
- Attendance will then be required at Court, for the hearing of the Annulment application, where the Court will decide whether to grant the Annulment or not.
Whether to grant an Annulment Order is entirely at the discretion of the Court.
If the application to Annul is made on the grounds that the Bankruptcy Order ought never to have been made, the burden is on the Bankrupt to show a defect in the Bankruptcy Petition proceedings, or in respect of the debt which formed the basis of the Petition.
Some examples of cases where Bankruptcy Orders have been annulled on this ground are as follows:-
- Where the Bankruptcy Petition debt was shown not to exist.
- Where the Bankruptcy Petition was not properly served on the Bankrupt.
- Where the Bankrupt was shown not to be under the jurisdiction of the Courts of England and Wales.
If the Bankrupt applies for Annulment on the basis that the Bankruptcy debts, costs and expenses are to be paid in full, or secured for, then full payment must be made to the Creditors, Official Receiver or Trustee in Bankruptcy, even where there is a dispute over any creditors’ claims, interest or costs before the Annulment will be granted by the Court.
The Bankrupt must give the Official Receiver, or any Trustee in Bankruptcy appointed, at least 28 days’ notice of the hearing. In a payment in full scenario, the Official Receiver, or any Trustee in Bankruptcy, must produce a report to the Court, 21 days prior to the hearing. The report must address the position of the assets and liabilities of the Bankrupt, detail any known creditors and confirm whether the Official Receiver or Trustee in Bankruptcy supports the application for Annulment.
Where an IVA has been approved by creditors, following the making of a Bankruptcy Order, the Bankrupt may apply for Annulment of the Bankruptcy Order after 28 days of the creditors having approved the IVA.
The granting of an Annulment Order
If at the hearing the Court is satisfied that the Bankruptcy Order should be Anulled then an Order will be made to this effect.
The Order should contain a provision that the Bankruptcy entries, which will have been registered against the Bankrupt’s property, should be vacated. It is essential that the Bankrupt applies to the Land Registry to remove such entries once the Annulment is granted, to ensure that no record of the Bankruptcy remains against the Bankrupt’s property.
The Bankrupt is also entitled to request in writing, within 28 days of the making of the Annulment Order, that the Annulment be published in the Gazette ( a notification which exists purely for the purpose of publishing official notices) and / or where the Bankruptcy Order may originally have been advertised, usually a local newspaper. It is the Bankrupt’s responsibility to pay for the publication of these notices.
Costs of the Annulment
The costs of Annulment will be paid depending on how the Bankruptcy is Annulled. If it is Annulled by a payment in full, then the costs will already have been taken into account when the Official Receiver or the Trustee in Bankruptcy has calculated the amount required to settle the debts, costs and expenses in full.
However, if the Bankruptcy is Annulled on the basis that the Bankruptcy Order should never have been made, it is at the Court’s discretion as to what costs ought to be paid and which party should bear those costs.
Should you find yourself subject to a Bankruptcy Order, and you believe that you have sufficient grounds to apply to Court to have the Bankruptcy Order Annulled, please contact Mark Davies and Jan Chillery for advice and assistance.