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Case Study - made bankrupt by HM Revenue & Customs
Mr B was made bankrupt by H M Revenue & Customs in February 2007 with total debts of £40,000. He was self employed and owned a property in joint names with his wife worth £250,000 with a mortgage of £50,000. His half share of the equity was therefore worth about £100,000.
He had instructed a firm of solicitors to make an application to court for an annulment of the bankruptcy order, however, they were unable to stop the Official Receiver from convening a meeting of creditors at which it was decided that an insolvency practitioner from a large firm of accountants should be appointed to act as Trustee. The new trustee had obtained agreement from creditors for his fees to be on a time cost basis. The hourly charge out rates of the trustee and his staff ranged from £80 to £500 per hour.
The trustee had contacted Mr B’s wife to ascertain whether she could raise funds to buy his half share interest in the property. The trustee now required £70,000 to pay off the debts which included some £30,000 as a result of costs, expenses and fees that had arisen in the bankruptcy. Mrs B’s income was insufficient to afford to borrow this amount in her sole name and Mr B could not borrow any money whilst he remained an undischarged bankrupt. The trustee had asked that the property be voluntarily sold failing which he would seek an order for possession from the court and substantial further costs.
We were able to implement an Individual Voluntary Arrangement (“IVA”) for Mr B on the basis that the debts, costs and expenses of the bankruptcy be paid in full. This was achieved by obtaining an annulment of the bankruptcy order shortly after the approval of the IVA which left Mr & Mrs B free to re-mortgage at normal rates and raise the requisite funds. Further, the total cost for achieving this was reduced to £59,700, a saving of over £10,000.
Had Mr B contacted us sooner, we could have prevented an independent trustee from being appointed which would have resulted in an additional saving of some £7,500 plus VAT.