Disputed bankruptcy petitions
Disputed bankruptcy petitions

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Disputed bankruptcy petitions
  • Conditions for making a bankruptcy order
  • Bankruptcy petitions issued on disputed debts
  • What constitutes a good petition debt and what doesn't?
  • The impact of the service of a statutory demand on the court's discretion to look into a disputed bankruptcy petition
  • Steps a debtor should take if they dispute the bankruptcy petition
  • What if the debtor does not dispute the debt but otherwise disputes the bankruptcy petition?

Conditions for making a bankruptcy order

When hearing a bankruptcy petition and deciding whether a bankruptcy order should be made, the court needs to be satisfied that the conditions in section 271(1) of the Insolvency Act 1986 (IA 1986) are met. The key ingredients are that an unsecured debt, which forms the basis of the petition, is owed to the creditor, and the debtor has no reasonable prospect of being able to pay it.

In Day v Refulgent (which concerned an appeal from the making of a bankruptcy order), it was held that where a freezing order had been obtained by a creditor in respect of the debtor, that did not mean that the debt due to the creditor was secured to prevent the creditor from seeking a bankruptcy order.

For further reading on the Day v Refulgent decision, see News Analysis: Seeking adjournments at bankruptcy hearings.

Where there are joint petitioning creditors, if that the time of the hearing of the bankruptcy petition only one of those petitioners seeks an immediate bankruptcy order (where, for example, the other joint petitioner seeks an adjournment), the court cannot make a bankruptcy order unless the other joint petitioner is acting in breach of duty (see Aabar Block SARL v Maud and News Analysis: Making a bankruptcy order when joint-petitioning creditors disagree (Aabar Block S.A.R.L.