Chris Macwilliam, Head of our Dispute Resolution Team, explains why it is vital not to ignore Statutory Demands and Bankruptcy Petitions.

Over the past few months, we have received several instructions from individuals seeking to annul Bankruptcy Orders that had recently been made against them.

In one case, the majority of the petition debt had already been paid, but the debtor missed the bankruptcy hearing after becoming stuck in traffic and being unable to contact the Court due to a lack of phone signal. In another case, the debtor had ignored both the Statutory Demand and the Bankruptcy Petition and, if the Bankruptcy Order remains in place, is at risk of losing his home.

In both instances, it is likely that the Bankruptcy Orders could have been avoided had legal advice been sought at an earlier stage.

Applications to annul a Bankruptcy Order can be expensive, particularly when taking into account the fees payable to the Official Receiver. As with all court applications, there is also no guarantee of success. Furthermore, the emotional toll on debtors and their families, including stress and anxiety, should not be underestimated.

We understand that if you or a family member receives a Statutory Demand or Bankruptcy Petition, it may be tempting to try to resolve the matter without legal assistance, especially when legal costs are perceived as high. However, the cost of dealing with a Statutory Demand or a pending Bankruptcy Petition is often significantly lower than the cost of pursuing an annulment application. It can also help avoid the practical difficulties and restrictions that arise once a Bankruptcy Order has been made, such as the freezing of bank accounts.

Our team can assist by negotiating with creditors, applying to set aside Statutory Demands where appropriate, and representing clients at bankruptcy hearings. It is important not to ignore or underestimate the significance of these documents.

We have also been concerned by reports from clients who were contacted by businesses shortly after Bankruptcy Orders were made against them. These companies claimed they could resolve the situation and make the debts disappear. In one instance, a client told us that he was being pressured into selling his home to an investor introduced by the very business he had instructed to help secure an annulment.

Under the proposed arrangement, the investor would pay off the bankruptcy debts but make no payment to the debtor, despite there being substantial equity in the property. As a result, the debtor would lose both his home and the benefit of that equity.

It is entirely understandable that individuals facing a Statutory Demand or Bankruptcy Order may feel overwhelmed, distressed, or embarrassed to discuss their situation with family and friends. However, it is essential to seek independent and impartial legal advice as soon as possible. Taking early action can significantly improve the available options and may help avoid the serious consequences of bankruptcy altogether.