Choosing the right form of proceedings
The form of enforcement chosen at the outset largely determines how long the process will take. Where there is a judgment or a negotiable instrument, the debtor cannot stop the proceedings with a bare objection. In ordinary proceedings by way of attachment, an objection filed in time suspends enforcement automatically and sends the creditor back to court.
What documents exist, what legal basis the claim rests on, and how likely an objection is should therefore be assessed together before anything is filed.
Assets put beyond reach
Debtors transferring property to relatives, or selling it well below value, in order to defeat creditors is a familiar pattern. Such transactions are not automatically void, but a creditor may bring an avoidance action and then enforce against those assets.
The action is brought against the debtor and the third-party transferee together. For transfers between close relatives, and for transactions showing an obvious disparity between value and price, the law provides presumptions that lighten the creditor’s burden of proof. The action must be brought within five years of the transaction.
- Identifying transfer dates and land registry records early is decisive
- Insolvency of the debtor must be established
- The five-year period is preclusive
Composition and restructuring
A debtor in payment difficulty may seek a composition with its creditors to restructure its debts. The court first grants a provisional moratorium and appoints a commissioner; where the conditions are met a definitive moratorium follows. During the moratorium no enforcement may be commenced and existing proceedings are stayed.
Composition is not only the debtor’s instrument. Creditors need to follow the process closely, register the claim in the correct amount and rank, and vote on the proposal deliberately. A creditor who stays outside the process is still bound by a proposal the majority accepts.
Winding up company assets
Bankruptcy is not the only route for an insolvent company. Ceasing operations, realising the assets and distributing the proceeds can also be achieved through restructuring agreements with creditors and sales conducted within existing enforcement proceedings, without entering the long and costly bankruptcy estate process.
Which route fits depends on the debt structure, the weight of secured claims and the nature of the assets. For directors, meeting the obligation to notify the court once balance-sheet insolvency is established is a separate and time-sensitive duty.
Frequently asked questions
The debtor transferred the house to their spouse. Is there anything I can do?
An avoidance action can be brought. For transfers between close relatives the law provides presumptions in the creditor’s favour. The action must be brought within five years of the transaction, which is why land registry records should be checked early.
What happens when the debtor objects?
In ordinary proceedings a timely objection suspends enforcement. The creditor must sue to set the objection aside, or apply to have it removed on the strength of the document held. Where the objection was unjustified, the debtor may be ordered to pay damages.
Can I still collect from a debtor in composition proceedings?
No enforcement is possible during the moratorium. You need to register the claim in time and in the correct amount, take part in the vote on the proposal, and establish whether your claim is secured. Staying outside the process reduces what can be recovered.