Can a creditor demand and accept money after sequestration?

craig1410

Hi,

A member of my family was sequestrated in 2008 and at the time they tried to cover up the situation from family and friends who were trying to help them financially at the time. Blemain Finance were one of their creditors and although they did not instigate the sequestration, they were notified by the Accountant in Bankruptcy that their client was under sequestration. However, Blemain declined to enlist with the AiB as a creditor and instead continued to pursue money directly from their client and accepted payments from another family member totalling some £14000 before the news of the sequestration became known. Unfortunately this happened because they were evicted so the truth could no longer be concealed. During the period following official sequestration, Blemain made repeated threats to evict their client and it was these threats which yielded the payments. Blemain even now after eviction has been completed, are still writing letters demanding money for fees and additional interest.

While I fully understand that the member of my family in question did herself no favours by trying to conceal the sequestration, I expect it is not an uncommon reaction and I feel that Blemain Finance have taken advantage. Obviously if we, her family, had known that she was sequestrated then we would not have paid money directly to any of her creditors and would have allowed the sequestration process to run its course. We were simply trying to prevent her being evicted by what we understand now to be a pretty unscrupulous lender.

So, my question is, has Blemain Finance broken any laws by pursuing a creditor (under threat of eviction) who they knew to be already sequestrated and is there any likelihood of seeing the return of the money taken during that period?

Any advice would be most welcome.
Thanks,
Craig.

coolcait

Did your family member have a secured loan from Blemain Finance? It sound that way, if they were able to evict ehr in the end.

If it was a secured loan, then she would have been expected to keep making the payments, even during her sequestration.

These extracts from the Accountan in Bankruptcy's Debtor's Guide explain how it works:

What happens if I cannot pay my mortgage?

If you have a loan secured on your house and you do not
continue to make your mortgage or loan payments, your
secured lender can repossess the house. Your trustee is
powerless to stop the repossession of the property. If your
house is repossessed and is sold by the lender, any proceeds
left after your debt is paid will be transferred to your trustee.

6.1 What happens to my debts after I am discharged?

Once you are discharged you do not have to repay the debts
which you had when you were made bankrupt, although there
are some exceptions to this.
You are still responsible for paying:
• ............
• money owed to someone who holds a security on your
property, such as a mortgage or secured loan.

You are still responsible for making payments to your secured

creditor, for example, for the mortgage on your house.

Here's a link to the full guide
http://www.aib.gov.uk/sites/default/files/publications/Debtor's%20Guide%20PDF.pdf

If it wasn't a secured loan, then it would be worth while having a word with CAB or a lawyer.

craig1410

Hi,

Thanks for your reply - not encouraging news though...

Yes I believe it was a secured loan as I think this is the only type of loan which Blemain are involved with. I believe it was for around £30k which would also put it into secured loan territory.

I'm very concerned about the possibility that the loan may still be payable after discharge from bankruptcy. Strangely, the Accountant in Bankruptcy told her not to respond to Blemain's letters because they had had their chance to enlist as a creditor but had chosen not to. I think also that the creditor which instigated the sequestration was HMRC in connection with her sole trader business which was in difficulty. I think HMRC are one of the "preferred creditors" who will get their money before other creditors.

Something I was unsure of was what would happen once she was discharged. The sale of her house has just been to a closing date and although we don't yet know if it has sold and for how much, the value of the house should ordinarily cover the cost of the outstanding debt with room to spare. In this event, what would happen to the proceeds of the house sale after debts have been satisfied? I have read that assets are not returned once discharged but would that be the case if all outstanding debts were satisfied in full?

It's all very confusing and probably not helped buy the fact I still don't think we know the whole story...

Thanks,
Craig.

coolcait

I'm finding it quite hard to decipher what might actually have happened in your relative's case.

You can only tell us what your relative has passed on to you, and she might not have fully understood everything she was told by her Trustee, so there's enormous scope for confusion anyway. That's even before you take into account that she has spent a long time not sharing this information with her family, so she might still find it difficult to be completely open with you.

The business about Blemain having "had their chance to enlist as a creditor but had chosen not to" doesn't really make sense.

All debts owed at the date of sequestration (with some exceptions) are included in the sequestration - whether the creditor wants it or not - and whether the sequestrated person wants it or not. There is no option to 'enlist as a creditor' or not.

One type of debt which is not included in the sequestration is a secured debt.

HMRC do not have preferred creditor status any more. If they petitioned for the sequestration, they can get those costs back. But, for the rest, they will get the same pro rata payout as the rest of the creditors in the sequestration.

As far as the sale of the house goes, then the usual order of things goes roughly like this:

- costs of the sale
- the amount owed to the secured creditor
- costs of the sequestration - trustee's fee, outlays, legal costs etc
- petitioning creditor's expenses
- preferred debts, if any (excluding interest)
- ordinary debts (pretty much everything else!)
- interest on i) preferred debts, then ii) ordinary debts
- postponed debts (not very common)

If anything is left over after all of that, it will be given back to the sequestrated person.

Assets are not 'returned' to the sequestrated person after their own personal discharge from sequestration, as it is still the Trustee's duty to try to 'realise' the money from them. Unless, as you have said, all of the costs of the sequestration and the debts owed to creditors have been paid off in full, with interest.

Once the Trustee has also been discharged, then the assets would be 'returned' to the person.

Unless the Trustee didn't know about the assets during the sequestration... Then it can be a much more complicated scenario, which would definitely call for legal advice.

If your relative is really looking for help in sorting everything out, then the best thing she can do is gather together all of her paperwork about the sequestration and go with you to CAB or a lawyer for advice.

HTH