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Personal insolvency case study: client’s Bankruptcy Order annulled and Bankruptcy Petition dismissed.

Our Client said: ‘Thank you for everything! I have been crying with relief all night! It still has not sunk in yet.’

This case study details how we applied for and obtained a Bankruptcy Annulment Order for a client, with the underlying Bankruptcy Petition also being dismissed on Annulment. Article by: Neil Davies, Solicitor and Managing Director of NDP and Contributory Editor to ‘Mithani: Directors’ Disqualification’ – the leading work on Director Disqualification law and practice, and by: Harman Randhawa, Paralegal at NDP, who had day to day conduct of this case.

What is annulment?

The effect of Annulment is that it restores the position to what it was before the Bankruptcy Order was made. In effect it cancels the Bankruptcy Order.

Basis of this annulment application

This Annulment Application was, a little unusually, made on the grounds that the Bankruptcy Order ought not to have been made’ (see section 282(1)(b) of the Insolvency Act 1986).

Ideally, matters would not have progressed to a Bankruptcy Order having been made against our client in the first place. The presentation of a Bankruptcy Petition is often a remedy of last resort to any creditor.

The Bankruptcy Petition is commonly (but not always) preceded by the service of a Statutory Demand. It is open to an individual to dispute the Statutory Demand that precedes the eventual Bankruptcy Petition, for example, by application to Court to set aside the Statutory Demand.

The application to the Court to annul

Section 282(1)(b) of the Insolvency Act 1986 states that:

‘if it is appears to the Court that on any grounds existing at the time the Bankruptcy Order was made, (our emphasis added) it ought not to have been made, the Court has the power to annul a Bankruptcy Order.’

This provision gives a very wide discretion to the Court as to its ability to annul a bankruptcy, with equal weight to be placed on a number of relevant factors.

There have been a number of decided Court cases where the Court has held that a Bankruptcy Order ought not to have been made, these include, but are not limited to, the following:

  • Where the Bankruptcy Petition debt was legitimately disputed by the bankrupt on and at the Bankruptcy Petition hearing.
  • Where set off was available to the debtor against the Bankruptcy Petition debt.
  • Where there was procedural irregularity i.e. incomplete or defective service of the Statutory Demand or Bankruptcy Petition (as in this case).

Details of this annulment of a Bankruptcy Order against our client

The client was made bankrupt over a year ago before the Annulment Order was made, following a claim for unpaid school fees for her child. Ideally, matters would not have progressed to a Bankruptcy Order being made against our client. However, our client was not served with the Bankruptcy Petition as she demonstrated in her evidence to the Court, signed off by her in support of her application to annul. She thus had no opportunity to oppose the Bankruptcy Petition.

Had our client been notified of the Bankruptcy Petition hearing date, she could have attended at the bankruptcy hearing itself and opposed the making of the Bankruptcy Order. She was denied that opportunity.

On these facts

As such it was imperative that an Annulment Application be made and progressed as soon as possible. The Application to annual was made promptly (as it had to be), soon after she became aware of the Bankruptcy Order having been made.

Even if the Bankruptcy Petition has been properly served (it was not), it remained our advice and our client’s view that the grounds on which the Bankruptcy Order was made were wholly disputed, with it being our client’s position that she was not  liable for the unpaid school fees in any event.

The annulment Court hearing

The Application to annul was resisted and strenuously opposed by the Petitioning Creditor. After hearing Counsel for both sides, the Judge was persuaded that in the circumstances it was appropriate to annul the client’s Bankruptcy and to dismiss the Bankruptcy Petition against our client.

Our Client was delighted with the successful outcome

She said:

‘Thank you for everything! I have been crying with relief all night! It still has not sunk in yet.’

Consequences of a Bankruptcy Order

Bankruptcy can be a very expensive exercise for the debtor. It can result in the debtor’s home becoming at risk of repossession and sale to meet not only the debts but also the costs and expenses of the bankruptcy.

There are options

The debtor can, for example, pre-bankruptcy:

  • Settle the Petition debt (by payment in whole or in part) by agreement.
  • Oppose the making of the Bankruptcy Order (on the type of grounds and basis referred to above).
  • Seek to enter into an Individual Voluntary Arrangement (‘IVA’), with the assistance of a Licensed Insolvency Practitioner (‘LIP’) – this is an alternative to a Bankruptcy Order and can enable the debtor to settle the claims of all his/her creditors.


We as a firm deal with all things insolvency, across corporate to personal issues. Whether you are an individual that has been made bankrupt or is subject to a Statutory Demand or a Bankruptcy Petition, NDP can assist and add value to your position. You always have options. We can tell you what those options are and how best to deploy them. Take a look at another testimonial for our work on this area.

Contact us or call us on 0121 200 7040 for a free of charge and without obligation initial chat.