What Is The Annulment To Cancel A Bankruptcy Order?
Bankruptcy Annulment Overview
Annulment of Bankruptcy is all about how to cancel a Bankruptcy Order. There are two major grounds to cancel (annul) a Bankruptcy Order:
- The Bankruptcy Order should not have been made.
- The debts and expenses of the Bankruptcy have been paid.
This position arises from Section 282(1) of the Insolvency Act 1986.
Although cancellation or annulment of a Bankruptcy Order are similar, the correct term is an annulment, which in effect means that the Bankruptcy Order was never made in the first place.
Order Should Not Have Been Made
Section 282(1)(a) of the Insolvency Act 1986 says that a Bankruptcy Order can be cancelled if the Order should not have been made.
The basis for cancelling a Bankruptcy Order is usually by considering the following three questions:
- Why was the Bankruptcy Order made in the first place?
- Should as a result the Bankruptcy Order not have been made?
- If the Bankruptcy Order should not have been made, should it now be annulled?
So even if the Bankruptcy Order should not have been made it does not automatically follow that it will be cancelled by the Court. The following will be considered:
- That it is the right thing to happen with the creditors’ interests in mind.
- If the creditor who petitioned for the Bankruptcy acted reasonably and therefore whether the Bankrupt could pay off the petitioner and other debts.
No Assets Available For A Bankruptcy
In some cases, the Court will consider if the Order should be cancelled based on the benefit or purpose of the Bankruptcy. It is for the Bankrupt to show that the Order should be cancelled and the Court will consider the following:
- Bankruptcy provides both a system to realise and distribute assets amongst creditors but it also allows investigations into the bankrupt’s assets and affairs.
- A Bankrupt must be able to show that there are no assets and that there is no prospect of any assets.
- The Bankrupt must satisfy the Court that will be no assets available for distribution to creditors and that no useful investigation of his or her assets and affairs can be undertaken.
Debts And Expenses Of Bankruptcy Have Been Paid
Section 282(1)(b) of the Insolvency Act 1986 says that a Bankruptcy Order can be cancelled if the bankruptcy debts and the expenses of the bankruptcy have all, since the making of the order, been either paid or secured for to the satisfaction of the court.