An intervening bankruptcy will not defeat a charging order where the bankruptcy was entered into in an attempt to frustrate the charge.

The court has a limited discretion not to make a bankruptcy order where the debt is the subject of a statutory demand which has not been paid and is outstanding at the time of the bankruptcy petition hearing.

The threat of insolvency proceedings against a corporate debtor can greatly assist a creditor's primary objective of getting paid, preferably in advance of everyone else. This is particularly so where the debtor is prevaricating but there is no genuine dispute that the sum in question is due and owing. Although the courts decry the use of the winding-up procedure as a means of debt collection, it is often a very effective tool.

Consider the following when faced with a corporate debtor who is refusing, without genuine reason, to settle its debts:

In circumstances where a debtor lacks mental capacity to deal with a statutory demand and subsequent bankruptcy petition, the court will rescind or annul a bankruptcy order.

In the current economic climate, there are a number of key issues facing borrowers in the event of lender insolvency or default.

Committed facilities/term loans

Provided they are fully drawn and the borrower is not in breach itself, the impact in the short term may not be too severe.

A guarantor can be made bankrupt where the terms of the guarantee create a debt obligation.

An agreement to pay off part of a judgment debt owed jointly with others will not of itself amount to consideration sufficient to prevent a creditor going against a debtor for the unpaid balance of the judgment.

The court has held that a statutory demand is valid despite the high default interest rate on an underlying loan.

The bankrupt’s trustee applied for a possession order of his home. The bankrupt unsuccessfully appealed his bankruptcy, the order in litigation that had led to his bankruptcy and the possession order, but he refused throughout to give up possession and applied for a committal order. The court found the bankrupt in contempt of court for failing to give possession and sentenced him to six months’ imprisonment.

Knowing how much money you owe and are owed is critical when considering disputes with other parties. You need to consider whether a right of set-off exists between you and the other party.