Kerry Underwood

INSTALMENT ORDER DOES NOT STOP BANKRUPCTY PETITION

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In Loson v Stack and another [2018] EWCA Civ 803 (17 April 2018)

the Court of Appeal considered the interplay between an order that a debtor pay a judgment creditor’s costs by instalment and bankruptcy proceedings against that debtor, and also the circumstances in which an instalment order should be made.

Here the Court of Appeal upheld a High Court decision to set aside an instalment order as the debtor had not provided evidence of a realistic payment schedule and so the creditor could enforce the debt in any way it wanted.

The creditor had enforced the costs order by way of a statutory demand and a bankruptcy petition, and the debtor subsequently obtained an instalment order as the County Court took the view that that would not stop the creditor from continuing with the bankruptcy proceedings.

The creditor applied to set aside the instalment order on the ground that it rendered the bankruptcy petition debt no longer due and immediately payable, and the High Court set aside the instalment order and the debtor appealed.

The Court of Appeal held that the debtor did not have the ability to pay the costs order and failed to provide any evidence of his ability to repay the debt and therefore the High Court had been right to set aside the instalment order.

The Court of Appeal commented that although the court has jurisdiction to make a bankruptcy order based on the position at the date that the bankruptcy petition was presented, it must, in the exercise of its discretion, consider the change of circumstances created by an instalment order.

The Court of Appeal considered, by analogy with Rule 10.24 of the Insolvency (England and Wales) Rules 2016, that there was significant doubt that a bankruptcy order could be made where the petition debt was no longer due and payable, and where any arrears were below the bankruptcy level of £5,000.

The decision is Court of Appeal authority for the proposition that a bankruptcy petition, based on a debt which is due and payable at the time that the petition was presented, may continue to be prosecuted by a creditor even where an instalment order is subsequently made, but it is unlikely that a bankruptcy order will be made if the petition debt is less than the bankruptcy level at the time of the hearing, even if the debt was originally above the bankruptcy level of £5,000.

It also demonstrates that, when applying for an instalment order under CPR 40.11 or CPR 40.9A, a debtor must provide evidence that he can pay the principal and interest within a reasonable time.

If that is not the case, then the court should not interfere with the creditor’s right to enforce the judgment by whatever means available.

 

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Written by kerryunderwood

May 2, 2018 at 8:29 am

Posted in Uncategorized

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