Personal Insolvency Law in Practice

Personal Insolvency Law in Practice

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March 2013
978 1 84661 135 3
Susan Morgan, Neil Smyth, John Tribe

This authoritative and practical text approaches the subject from the point of view of the over-indebted individual and the remedies available.

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With the entire canon of the Insolvency Rules 1986 being completely revised in October 2008, Personal Insolvency Law in Practice is a highly authoritative and practically relevant text approaching the subject from the point of view of the over-indebted individual. The text adopts a highly structured approach to each of the main remedies for insolvent individuals, explaining:

  • WHO are the main actors?
  • WHAT is the remedy?
  • WHEN should the remedy be used?
  • WHERE is the appropriate forum?
  • WHY is the remedy appropriate?
  • HOW does the remedy work?

The book provides definitive black letter law, but with an emphasis on providing practical advice. It also makes use of all Dear IP and SIP materials, providing everything required by accountants.

The leading author team, drawn from accountancy, the legal profession and academia ensures that the text encompasses all possible approaches to the subject.

Susan Morgan, Senior Technical Manager, KPMG LLP

Neil SmythNeil Smyth
, Partner, Taylor Wessing
Neil is a Partner in the Restructuring & Corporate Recovery group at Taylor Wessing and specialises in various areas, including personal insolvency, heading up the personal insolvency team. Neil acts for lenders, landlords, insolvency practitioners, individuals and creditors alike advising on all forms of personal insolvency matters, including the recovery of guarantee debts.

Taylor Wessing and Neil are ranked band 1 in the Restructuring/Insolvency Section for personal insolvency in Chambers 2013 and have a particular specialism in acting on complex high value personal insolvency matters, often with cross jurisdictional issues.

John Tribe

John Tribe, KPMG Lecturer in Restructuring, Kingston Law School, Kingston University

John Tribe LL.B LL.M Ph.D is the KPMG Principal Lecturer in Restructuring at Kingston University Law School. Following completion of postgraduate work at University College London, where he was awarded the Joseph Hume Scholarship in Law, John was appointed to his first academic post at Kingston Law School in August 2003 as a Lecturer in Law. John was the curator of a display on the history of bankruptcy at the Royal Courts of Justice (2010-2011) and is an editorial board member of Butterworths' Corporate Rescue and Insolvency, an Advisory Board Member of Mithani: Directors Disqualification, LexisNexis (looseleaf), and a consultant editor of Jordan Publishing's Bankruptcy and Personal Insolvency Reports.

John has published widely on personal insolvency, corporate insolvency and bankruptcy history. In 2006 he gave evidence to the Scottish Parliament on bankruptcy reform and his work has been supportively cited by a number of his senior colleagues. An experienced media commentator, he has appeared on BBC television and given a number of quotes to the national press on personal insolvency matters. John has undertaken commissioned research for the Insolvency Service (2005 and 2007), Grant Thornton (2007), KPMG (2009), Baker Tilly (2011) and the London Gazette (2012 - ongoing).

  • Foreword - by The Honourable Mr Justice Lightman
  • Introduction
  • A History of Personal Insolvency Law
  • The Nature and Purpose of Modern Personal Insolvency Legislation
  • The Main Players
  • Types of Debt
  • Likely Creditors
  • An Introduction to the Main Types of Remedy
  • Bankruptcy
  • Individual Voluntary Arrangements
  • Debt Relief Orders
  • Informal Arrangements with Creditors
  • Financial Management for Debtors
  • Conclusions


‘Insolvency is not a very thrilling or amusing subject.’ 
(Lord Mishcon, Hansard, 15 January 1985)

Personal insolvency and over-indebtedness is by its nature a pervasive subject that touches on many complex and difficult areas of life. The tentacles of the personal insolvency law that has been developed to address these difficulties stretch into many disparate areas of law. This makes this book a composite of, inter alia, property law, equity, finance law, securities law, and family law. To address this all encompassing quality of the subject thoroughly this personal insolvency law practitioners’ text is a collaborative effort between three authors writing from three different perspectives. The author team comprises a practicing solicitor who specialises in insolvency law; an accountant technical and compliance manager at one of the big four accountancy firms; and finally, an academic who specialises in personal insolvency law (hereinafter collectively referred to as the ‘author team’). We hope that this combined inter-disciplinary approach has made for a book that is more insightful and practically relevant than would otherwise be possible. We have tried to bring our respective experiences and perceptions to the project during the drafting of the entire text so that each chapter has been imbued with practical and scholarly elements. In the interests of our main audience, namely, insolvency lawyers and insolvency practitioners (hereinafter referred to collectively as ‘the profession’), we have decided to include a question format throughout the text (where appropriate) and have attempted to answer these common questions in a practical manner. We have done this because we hope it will make the book easier to use in terms of navigation and practical relevance. Overall we also hope that this book goes some way to disprove Lord Mishcon’s contention as cited above!

The book is divided into 27 chapters. This treatment provides guidance on the various personal insolvency procedures that are currently in force in England, Wales and Northern Ireland. The first five chapters examine the topic of personal debt together with the solutions that are available to debtors. In particular we examine the nature of personal debt, the key players who are involved in the personal insolvency landscape, the formal solutions that are available and, finally, we examine the assets that may be available to satisfy creditors.

This broad discussion is followed by more detailed procedural chapters relating to bankruptcy proceedings, Individual Voluntary Arrangements (IVAs) and low income solutions. A glossary and appendix of pertinent materials is also included.

This book includes a signposting system which begins in the first two chapters. The first chapter sets out the main solutions that are available to the users of the personal insolvency regime, namely, debtors and creditors and also includes a section on the best advice process as this is particularly important as part of the current personal insolvency zeitgeist. The key stakeholders, along with some other parties are looked at in detail in Chapter 2. An exposition of the different types of debt and assets then follows to complete this section of the book. These chapters should be read as background and a general introduction that serves as a signposting mechanism to a more thorough treatment elsewhere in the text.

We then move to the beginning of our thorough procedural treatment. In the second section of the book we have attempted to provide an exposition of the current personal insolvency procedures in England, Wales and Northern Ireland. This treatment encompasses a critical discussion of bankruptcy, individual voluntary arrangements, debt relief orders, county court administration orders, and deeds of arrangement. The majority of our treatment is spent on the bankruptcy jurisdiction (Chapters 6 to 20). We have included chapters on current vogue subjects, ie cross-border insolvency in the personal context (Chapter 20), and bankruptcy and the matrimonial home (Chapter 18), as well as more traditional discussions, such as deeds of arrangements and their successor individual voluntary arrangements (Chapters 23 to 27). We have also attempted to provide an examination of some of the newer low-income procedures, ie debt relief orders (Chapter 27).

Our treatment of procedures has been divided along chronological lines in terms of the timeline of the process, ie pre-petition, creditor’s and debtor’s petition, creditor communications, discharge, and such like. We hope that this flow aids the practical utility of the book.

We cannot of course refer to previous editions of this practitioners’ text and the volume of case-law and legislation that has appeared in-between editions as this is the first edition. We can however highlight some of the key cases that have been of interest to the profession over the last couple of years or so and which have been discussed in our treatment. We have dedicated an entire chapter (18) to bankruptcy and the matrimonial home to reflect the importance of the House of Lord’s opinion in Stack v Dowden [2007] UKHL17, 2 AC 432 and the Court of Appeal’s recent decision in Hill v Haines [2007] EWCA (Civ) 1284; [2008] 2 WLR 1250 and Jones v Kernott [2011] UKSC 53. Chapter 20 contains a critical examination of the vexed issue of cross-border bankruptcy and the effect of the judgment in Re HIH Casualty and General Insurance Ltd [2008] UKHL 21, as it applies to personal insolvency law. Similarly, we have included a discussion of the new low-income personal insolvency procedures in Chapter 27, and the reform documents that led to these innovative new procedures. In so doing we hope that we have addressed some of the issues that are of interest to the profession at the current time. We hope we have also gone some way to address Mr Basil Montagu QC’s contention that:

     ‘Our professional duties consist, not merely in activity and in publication upon some practical
      part of professional knowledge, which repay themselves; but in availing ourselves of every
      opportunity to visit and strengthen the route and foundation of the science itself.’

      (Montagu, B. Some Observations upon the Bill for the Improvement of the Bankrupt Laws
      (1822) Butterworths, London, at page 73)

We must now turn to those whom we as the author team owe a debt. We would like to thank Sally Drever and Mary Kenny of Jordan Publishing Ltd, our publishers, for their immense patience and help in bringing this book to fruition. They have been tireless in their support and encouragement and for that we are very grateful indeed. A particular debt of gratitude is owed to Barbara McKenzie, Deborah Manzoori and Sarah Harmsworth who have painstakingly read and commented on various draft chapters of this book. We are grateful for their comments. We also have a number of individual acknowledgements. Sue Morgan (SM) would like to thank her friends and family for all their support. John Tribe (JT) would like to thank his colleagues at Kingston Law School for providing a vibrant research and teaching environment and Professors Graham, Fletcher, Walters, Finch, Rajak, Keay and Milman for their continued encouragement and support. John is also grateful to KPMG LLP and the partners of the firm, particularly John Milsom, for the continued support for the KPMG Lectureship in Restructuring.

Although recent anecdotal evidence suggests that increasing numbers of women are using formal insolvency solutions in this book for consistency the masculine includes the feminine and the singular includes the plural. The law that is contained in this book is correct up to and including the 31 December 2012 and covers in detail the 2010 amendment rules which came into force on 6 April 2010. Where possible we will provide materials that go some way to update the text via the website, pending any future editions. The author team would be grateful for any feedback on the form and contents of the book. The usual caveats apply in terms of the contents of the book. Any defects, shortcomings, errors or omissions are the collective responsibility of the author team.

SM, NS and JT
February 2013
Salisbury Square, London

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"practical as it is scholarly and purpose designed for ease of use"

"a wide far ranging, insightful and succint treatment of this vexed subject"

"the book provides all materials required by accountants"

"a superlative and certainly authoritative reference resource for the insolvency practitioner in one handy volume--ideal not only for practitioners, but for other advisers, as well as creditors and debtors. If you are involved in insolvency matters you need this book"
Phillip Taylor MBE and Elizabeth Taylor of Richmond Green Chambers

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Neil Taylor,

Chapter 5


'At last it is all gone. Nothing is left about the house
but scattered leaves of catalogues,’

5.1 This chapter briefly examines the range of assets that may be owned by an individual and briefly compares how those assets are treated in DMPs, IVAs, bankruptcy and DROs. Any assets that can potentially be excluded from formal insolvency proceedings are briefly discussed within each section. Chapter 17 deals with other assets that may fall into a bankrupt’s estate and how these are dealt with specifically in bankruptcy. Further discussion is provided specifically on the matrimonial home in bankruptcy proceedings in chapter 18. For any individual that is in financial difficulty the option to sell assets and realise their potential will often be the first step to trying to solve any financial difficulty.


How are land and buildings treated?
5.2 Land and buildings can be the most valuable asset in a personal insolvency and therefore the most important asset. Conversely any loans secured on the property may also be substantial. The following paragraphs will examine land, before going on to discuss buildings on that land and the different forms of ownership that can exist in relation to both domestic and commercial property, ie sole and joint ownership;

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