Bankruptcy – To Annul or not to Annul that is the question?


An application for annulment is a means of erasing a bankruptcy order as though it never happened.  Whilst not strictly necessary, even if it is an option, annulment can be a useful tool to circumvent the loss of your assets (often the family home), preserve reputational and credit status and avoid any challenge to transactions made in the five years immediately prior to bankruptcy (e.g. gifts to family). Annulment also often reduces the costs and expenses incurred in dealing with your bankruptcy estate.  If an annulment order is granted, you can then apply to remove the bankruptcy from your credit record.

There are three grounds upon which a bankruptcy order can be annulled:

  • Mandatory annulment under Section 261(2) IA86 where you have entered into an Individual Voluntary Arrangement with your creditors since the bankruptcy order was made.
  • Discretionary annulment under Section 282(1):
  • That on any grounds existing at the time, the bankruptcy order ought not to have been made

Examples:

  • where you can show that the petition debt did not exist, or was insufficient to found the basis of a bankruptcy petition (less than £5,000), or was not enforceable at the time when the bankruptcy order was made;
  • where the Court did not have jurisdiction or some other procedural irregularity.

or

  • That the bankruptcy debts, costs and expenses of the bankruptcy have all been paid or security has been given for them to the satisfaction of the Court.

This means not just the petition debt but all debts, the Official Receiver’s costs, the Trustee’s costs and statutory interest (subject to the Court’s discretion)

Title to any property which vested in the Official Receiver or your Trustee following the making of the bankruptcy order and which has not been sold at the point of annulment will revert to you.  However, any sale or other disposition of property by the Official Receiver or Trustee prior to the annulment will be valid and cannot be overturned.  If annulment appears to be open to you, it is therefore important to seek advice and to apply for an annulment as soon as practicable and to alert the Official Receiver and/or Trustee of your intention to do so that they do not inadvertently take unnecessary steps or incur additional costs and expenses.

We recommend that you take legal advice prior to making an application for annulment to ensure that the application is properly founded, made at the appropriate time, that the evidence in support is carefully presented to the Court and that communications with the Official Receiver and Trustee are properly handled.  This will afford the application the best prospects of a successful outcome.

If you require advice about personal insolvency, please do not hesitate to contact Sarah Mower or John Bradshaw of the Barker Gotelee Insolvency & Business Recovery Team for an informal chat.

Sarah Mower is a chartered legal executive and specialist in Insolvency & Business Recovery at Barker Gotelee Solicitors.

Suffolk Insolvency Solicitors – for more information on our range of legal services, please call the team on 01473 611211 or email bg@barkergotelee.co.uk