Insolvency and clawing back assets for creditors

Individual insolvency refers to someone who is unable to pay their debts. There are three principle ways of evidencing that someone is insolvent.

  1. A statutory demand has been served for a liquidated and unsecured sum of at least £5,000 or more, payable immediately, and after three weeks it remains unsatisfied.
  2. A statutory demand has been served for a liquidated and unsecured future liability of at least 5,000 and three weeks have passed without a reasonable prospect for payment being shown.
  3. Attempt has been mad to enforce a judgment debt of at least 5,000 but it remains unsatisfied (eg enforcement has been sent to recover funds but it has not been successful).

Bankruptcy is a process whereby most of the bankrupt’s assets pass to a trustee in bankruptcy and the bankrupt becomes subject to restrictions.

Bankruptcy usually starts with a creditors petition.

An example of such a petition is here: bank-1-eng.odt (

A trustee in bankruptcy receives significant powers to realise the bankrupt’s assets in favour of the creditors. The Court could make an order to sell the bankrupt’s assets, including a house.

Ownership of all the assets in the ‘bankrupt’s estate’ passes to (vests in) the Trustee automatically on their appointment or if this is the Official Receiver, on them becoming the trustee. The main duty of the TIB is to convert the value of the assets in an estate to money. From these proceeds the TIB will first pay their own costs and expenses while the balance available will be used to pay off as much of the ‘bankruptcy debts’ as possible. The TIB has wide powers to enable them to perform their duties.

In England & Wales, when the adjudicator makes a bankruptcy order, it will pass its files to the Official Receiver (OR), who is a person who works for the Insolvency Service. The OR becomes the trustee of your estate (TIB) on the making of the bankruptcy order. The only exception to this is, if you already have an individual voluntary arrangement, the court can instead appoint the approved supervisor as trustee.