Glossary - Bankruptcy

Bankruptcy
A bankruptcy, which is normally a debtor’s last resort, happens when lenders take his or her assets – house or vehicle – and sells them to settle part of the debt.

Bankruptcy Order
This court order declares someone as being bankrupt.

Discharged Bankrupt
People who repay their debt or whose debt gets written off and then get discharged from the bankruptcy.

Charge
A charge is when real or personal property is seized to pay off a debt. It allows the creditor no property in, or possession of, the security’s subject.

Company Voluntary Arrangement
This procedure aims to reorganize or combine a company’s debt. A supervisor consults the company’s creditors and shareholders beforehand and the court has minimal involvement in this scheme.

Disqualification of Directors
Should a company director be guilty of conducting an insolvent company’s affairs in an unfit manner, he or she may be disqualified. The DTI needs to apply to the court and this may lead to a ban on the director’s involvement in any management position for between two and 15 years.

Fraudulent Trading
This type of trading is where a company carries on operating with intent to defraud creditors, or for any fraudulent purpose. This is a criminal offence and those involved may be personally liable.

Trustee
Authorised insolvency practitioners deal with a bankrupt’s estate. Deeds of arrangements rely on an authorised insolvency practitioner to deal with the person’s estate who is entered into the deed.

Compulsory Liquidation
A creditor appeals for a company’s liquidation.

Annulment
Termination of contracts.

Assets
Items which are owned by the debtor which can be used to clear his/her debts

Compulsory Liquidation
Closing down of a company after a formal application has been made to the court – usually by a creditor

Creditor
An individual who is owed money by a bankrupt or business.

Director
An individual who carries out the affairs of an organisation.

Disqualification
Disqualification is the process whereby a court order action has been raised against an individual which makes it illegal for that individual to be involved as a director or indeed the management of any organisation for the term detailed in that court order (unless the court gives permission again).

Dividend
Monies given to unsecured creditors in a liquidation situation.

Guarantee
A written agreement to reimburse a debt owed by a third party.

Petition
An official submission made to court.

Preferential creditor
A preferential creditor is someone who is permitted to get paid before floating charge holders and any other unsecured creditors. This includes occupational pension schemes and employees.

Proof of debt
A legal form which is completed and submitted by a creditor in a compulsory liquidation situation to detail amounts claimed. This form is provided by the liquidator.

Proxy
If you are unable to attend a meeting, you can arrange to select someone else to attend on your behalf.

Realise
To realise an asset is to sell it in order to raise funds.

Rescission
This is the term used when a winding-up order is being called off.

Release
The procedure of how the Official Receiver or Insolvency Practitioner is ‘released’ from the duties of bankruptcy trustee, liquidator or administrator.

Secured Creditor
A secured creditor is someone who holds collateral (e.g. a mortgage) over an individuals assets for any finance owed.

Shadow director
An individual who instructs directors or an organisation which has not been officially appointed as a ‘director’ or that organisation.

Statement of affairs
A paper which has been written by the bankrupt and has been sworn to under oath. It includes the details of all assets and information on all associated debts and creditors involved.

Supervisor
A supervisor is an Insolvency Practitioner who has been assigned to deliver a company voluntary arrangement.

Voluntary liquidation
A process of liquidation which does not involve the courts or an official receiver. There are two types For solvent companies they would use members’ voluntary liquidation and for insolvent companies, creditors’ voluntary liquidation.

Winding up order
A legal court order to liquidise a company. This is normally done as a consequence of a creditors petition.