Interim order saves the day

How detailed knowledge of insolvency law helped a couple avoid bankruptcy and rebuild for the future.

The situation

A retired company director had built up personal debts of more than £100k. He wanted to clear the debt by selling the matrimonial home to realise £120k of equity. Meanwhile, his creditors were pushing for bankruptcy which would have meant he had no control over the sale. He had sought advice from several places, but it was only when he met Jim Pretty, partner in charge of Atherton Bailey's Southampton office, he realised he had other options.

What we did

When the retired director came to Atherton Bailey, a bankruptcy petition had been issued and he was staring in the face the inevitable repossession and sale of the matrimonial home.

Firstly, Jim advised the client that only half the equity in the house (£60k) belonged to him - his wife owned the other half and this was hers to keep. None of the debt advisors he had consulted seemed to know this, but it is significant in such cases.

Rather than bankruptcy, Jim recommended an individual voluntary arrangement (IVA) with his creditors. This would protect his wife's share of the property and prevent her having to share the costs of the proceedings, which would have occurred if a trustee in bankruptcy had obtained a possession and sale order. It is a critical benefit of IVAs in such cases.

Speed was vital and Jim immediately applied to the court for an interim order which halted the bankruptcy proceedings while the IVA was prepared. He then put the IVA to creditors and it was approved.

The result

Ultimately, the house was sold at its full market value, rather than a forced sale due to bankruptcy. The client's wife kept her £60k equity for a deposit on a smaller property. Meanwhile, creditors received almost 60p in the pound, much more than they would have through a bankruptcy.