Can a Creditor Make Me Bankrupt?

With household debt in the UK now topping 2 trillion pounds, you wouldn’t be alone if you are wondering can a creditor make me bankrupt.

Bankruptcy is one way to deal with debt that has gotten out of control. It’s possible for you to apply for bankruptcy yourself, with fees associated with your application. It’s a serious step with long term implications and not one to be taken lightly. Unfortunately, even if you do not choose bankruptcy, creditors can follow a legal process which results in making someone bankrupt.

How Does a Creditor Apply for Bankruptcy?

If you are struggling with debt, it’s important to know what to expect if a creditor takes legal action against you. Let’s look at the steps required for a creditor to apply for bankruptcy.

1. According to Citizens Advice, the answer to can a creditor make me bankrupt? depends firstly on the amount owed to the creditor. A creditor must be owed at least £5,000 and must have taken reasonable steps to attain that from you. This may include:
2. Sending a statutory demand. The creditor is giving you legal notice of the money owed by you and their intention to petition for you to be made bankrupt.
3. The debtor has 21 days to respond to this order. This is when you can try to negotiate payment or an agreement about the outstanding debt.
4. Within 18 days you could also apply to have the statutory demand set aside if you have reason to believe that the claim is false (for example, the debt has already been paid, or is able to be settled in a different manner).
5. The process of making someone bankrupt can also include the creditor applying for a court order to attempt to retrieve the money owed whereby a bailiff seeks to enter your property to retrieve goods of value which can be sold as a means to repay debt.

While it might be tempting to put your head in the sand and ignore the statutory demand, it isn’t wise to do so. A statutory demand is a legal document served on you under the Insolvency Act 1986, if it is considered that you are ‘lying low’ to avoid being served with the statutory demand, it may be taken as though you were served (did receive) the order and so are responsible for it.

Can a creditor make you bankrupt without going through this legal process?

No, and they are also responsible for the bankruptcy application fee and bankruptcy petition deposit if they are making someone bankrupt.

If a creditor has followed the steps above and the debt is not resolved and/or the debtor hasn’t responded to the statutory demand, the creditor can petition for bankruptcy and a bankruptcy order will be made with the Insolvency Service and a bankruptcy notice gazetted in the Government Gazette.

Legal Advice You Can Trust If Your Creditor Is Making You Bankrupt

It is wise to consider all options available to you and the legal, financial, and personal implications of those if you have a creditor applying for bankruptcy. Contact Irwin Insolvency today for confidential and trusted information on bankruptcy.