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I Used An Inheritance To Pay Down Debts Can I Go Bankrupt?

Question:

I have debts of 12,000. Recently I receive 5,000 from inheritance. I used some of the money to pay down debts. I have 200 left. Can I go bankrupt?

Answer:

If something has been done in the run-up to insolvency which results in one creditor being treated more favourably than the others or where a person other than a creditor benefits from the actions of the bankrupt or company and the creditors suffer as a result, the official receiver as trustee or liquidator of the estate may have a right of recovery. For example, where one or more debts have been paid or substantially reduced in preference to others, it may be possible to recover the monies paid to the creditor preferred in this way.

For the official receiver, it is likely that the types of transaction covered by this part will become apparent at the initial interview. Once identified, the examiner may conduct an inspection of the accounting and/or banking records and will wish to obtain confirmation of the events that took place from creditors, suppliers or other persons capable of giving relevant information.

What can the trustee/liquidator do?

Under the antecedent recovery provisions, the trustee/liquidator may be able to recover assets or monies or to take other action to recover the position e.g. by applying to have a charge set aside. This type of recovery is made under the civil law although the events that gave rise to the right to recover may also lead to a criminal prosecution or be considered in disqualification proceedings.

In the majority of cases, the recovery will be made by an application to the court, unless those persons who benefited from the transactions are willing to return the property without the need to resort to court action. As many of these types of action will have been taken with insolvency very much in mind, court action will be necessary to achieve a recovery more often than not.

It would smart for you to discuss your situation with one of our bankruptcy experts in our Bankruptcy Assistance Service before you petition for bankruptcy to make sure you don’t find yourself in trouble with the court.

Thank you for letting me help you.

Jon

If you have a bankruptcy question you’d like to ask, just ask using this online form. All help is free.