An order of the court declaring an individual bankrupt.

Restructuring & Insolvency analysis: The High Court considered the circumstances in which a court may make an immediate bankruptcy order for non-compliance with an unless order, and the relevance of anticipated repayment of the underlying principal debt. Dismissing the appeal, the court held that a bankruptcy order was appropriate where the debtors failed to comply with procedural orders and there was no sufficient prospect of the guaranteed debt being paid within a reasonable time, despite evidence that the principal debt might be repaid in the future. The court’s analysis clarifies that a guarantor’s liability arises on default and is not contingent on the timing or likelihood of recovery from the principal debtor. Speculative or uncertain future receipts will not ordinarily justify delaying bankruptcy proceedings. The judgment provides important guidance on the court’s approach to procedural default, including how applications to extend time are treated and the consequences of non-compliance with unless orders. It also confirms the court’s willingness to characterise and respond robustly to dilatory litigation conduct in insolvency proceedings. Written by Katherine Traynor, barrister at Landmark Chambers.

Restructuring & Insolvency analysis: Karen Troy, barrister at Exchange Chambers in Manchester, and who acted in the case, explains the implications of the Court of Appeal’s decision in Yang v Official Receiver and others.

Under the Insolvency Act 1986, a person may petition the court for a bankruptcy order to be made against an individual.

Under the Insolvency Act 1986, a person may petition the court for a bankruptcy order to be made against an individual.

Restructuring & Insolvency analysis: The court made a bankruptcy order on a petition based on unpaid costs orders totalling £1,478,565, rejecting all grounds of opposition. Applying the Turner principle, the court refused to revisit cross-claims already rejected at the statutory demand stage. The petition was not an abuse of process—the petitioners had a proper purpose in seeking collective enforcement and having an independent trustee investigate the debtor’s claims. The court rejected arguments that bankruptcy would be ‘pointless’ despite the debtor’s alleged impecuniosity, noting the heavy burden of proving one is ‘too poor to be made bankrupt’ and the debtor’s admitted 51% stake in a Saudi company. Claims that costs orders were procured by fraud failed, particularly as the orders would have been made anyway due to the debtor’s deliberate failure to give full and frank disclosure. Written by Justin Perring, barrister at New Square Chambers.

Restructuring & Insolvency analysis: A settlement deed provided for the payment by Mr Sandelson of £1.25m to Ms Mulville as a settlement sum. Several obligations would have arisen upon receipt of the settlement sum, but it was never paid. Ms Mulville therefore presented a bankruptcy petition against Mr Sandelson. The question for the court was whether the obligation to pay the settlement sum was independent and unqualified—if not, it could not form the basis of the petition. Roth J held that it was an independent obligation: payment of the settlement sum was a discrete obligation which had to be fulfilled first, and within 21 days of the agreement. The case demonstrates the importance of careful drafting—it should be made clear that an obligation to pay is conditional, or else non-payment can give rise to insolvency proceedings. Written by Karl Anderson, barrister, at 4 Stone Buildings.

Before the hearing of the creditors’ bankruptcy petition takes place, there are a number of steps that must be taken to comply with the procedural requirements set out in the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024 and Practice Direction on Insolvency Proceedings (PDIP), including those that may be taken by the debtor or any other creditor if they wish to formally engage in the creditors' bankruptcy petition process. Steps to be taken by the petitioning creditor before the hearing The petitioning creditor must take several procedural steps before the hearing of the bankruptcy petition: • the petitioning creditor will need to ensure that at least 14 days has elapsed since the bankruptcy petition was served on the debtor. The petition can only be heard if less than 14 days has elapsed if: ◦ it appears to the court that the debtor has absconded ◦ the court is satisfied that there is a proper case for an expedited hearing, or ◦ the debtor consents to the hearing

Bankruptcy proceedings are the formal court processes used to deal with an insolvent individual’s debts, usually resulting in the realisation and distribution of their assets to creditors and, ultimately, discharge of most remaining debts. In England and Wales and Northern Ireland, bankruptcy is governed principally by the Insolvency Act 1986 and related rules. Proceedings are commenced by a bankruptcy petition (creditor or debtor) and, if granted, a bankruptcy order. An official receiver or trustee in bankruptcy then collects and realises the bankrupt’s estate, challenges antecedent transactions where appropriate, and distributes dividends to creditors according to statutory priority. In Scotland, the equivalent process is sequestration under the Bankruptcy (Scotland) Act 2016, but “bankruptcy proceedings” is frequently used as a generic term in practice. In Ireland, bankruptcy proceedings are governed mainly by the Bankruptcy Act 1988 (as amended). They begin with a petition and adjudication of bankruptcy, followed by the administration of the estate by the Official Assignee and potential discharge. Across all jurisdictions, bankruptcy proceedings are distinct from corporate insolvency processes and have significant consequences for the debtor’s assets, income, credit status and commercial capacity.

An order which imposes restrictions upon a bankrupt beyond his discharge from bankruptcy.

A court order extending the restrictions imposed on a Bankrupt for between two and fifteen years notwithstanding Bankruptcy Discharge.

A bankrupt is discharged from bankruptcy one year after their bankruptcy commences, unless the court grants a suspension of that discharge by reason of a bankrupt's failure to co-operate with the official receiver (OR) or their trustee in bankruptcy (trustee)—see section 279 of the Insolvency Act 1986 (IA 1986). On discharge, the disqualifications and restrictions which apply to an undischarged bankrupt cease. For further reading on what these disqualifications and restrictions are, see Practice Note: The immediate effects of a bankruptcy order on the bankrupt. What are bankruptcy restrictions orders and why they were introduced? In those cases of bankruptcy which are not simply the result of honest misfortune—but are due to the bankrupt's misconduct or recklessness—it is considered appropriate to ensure that the disqualifications and restrictions imposed in bankruptcy are maintained for a longer period than one year, to protect the public interest and serve as a deterrent. As a result, the Enterprise Act 2002 inserted a new section (IA 1986, s 281A) and Schedule (IA 1986, Sch 4A) into the IA 1986, so that