Official Receiver Advice Required

Cooking_on_Gas

Hi

My Step Father is currently going through the process of declaring himself bankrupt.

I lent him £40,000 about 18 months ago to clear some debts, service others and maintain some standard of life for my mother until a house sale went through which would release an amount of equity.

The sale of the house did go through but basically there wasn't enough money to repay me the whole amount, however, he did repay £10,000.

Since paying this money back he has decided that insolvency is the only option. He was completely honest with the OR about the £10,000 but now the OR receiver has written to me stating that I have been made a preference under section 340 of the bankruptcy act in in priciple I should pay the money back so all creditors can be treated equally.

The other creditors are credit card companies and a bank who make millions from us all and unlike me make provision for bad debts!

I need to go back to the OR with comments and I was looking for some advice if anyone has any for what to say.

scaredwitless32

have no idea on this, but someone will be of help soon.
I hope you get it sorted.

wherediditallgo

Under the BR legislation, you would be classed as a preferential creditor as you've received a payment that wasn't offered to all of the other creditors, for them to refuse or accept as they choose. I agree it seems very unfair when you were trying to help out a family member - you're hardly in the same position as the big institutions to forget about the money you loaned.

I would write back to the OR, explaining when the money was loaned & the basis for the loan being given. I don't think it will serve your case well to argue with the OR about the rights & wrongs of them requesting the money, but I would explain that (a) you only got a quarter of the money back, as opposed to the loan being settled in full, so you've already lost 75% of it, & (b) you're not in a position to return the money as you cannot afford to lose any more of it. As far as I'm aware, the OR can't legally force you to return the money, but they can make your stepfather's BR more difficult if you don't - they could impose a BRO (Bankruptcy Restriction Order) on him for having treated a creditor preferentially, which would extend the restrictions on his BR by anything up to 15 years depending on what else is taken into account. I think it's the worry about that bit that makes some people return the money even when they can't afford to do so. It rarely happens, but it is an option available to the OR.

Cooking_on_Gas

I've drafted the letter and have pretty much included what you have said.

Trying to do the right thing by someone doesn't always work out! Hopefully everything will get sorted.

Thanks for taking the time to reply, it's really appreciated.

worried123

Cooking on gas (I know this is all serious stuff but some of these names make me smile!)

Wherediditallgo (ditto) seems to have given good advice.

I felt really moved by the injustice of your post. Surely if your step father repaid you this money before he went bankrupt there is no way whatsoever the official receiver can have any claim over the money at all. The big banks etc - your stepfather`s other creditors will not lose out at all....they are insured for things like this happening - at the end of the day they will probably lost nothing whatsoever even from debts that are written off - whereas you have no provision whatsoever to cover the 30K that you might not ever see again.....This is outrageous actually.

I have not had my offficial OR interview yet but i have spoken to him and conversed over queries through e-mail and although he is strict etc....he is also a very nice man - very human - very fair etc....I could not imagine that if I were in the same situation that he would ask for money back like this....
Infact, I do not think they can do that.

Very good luck to you and very best wishes.

PS - Also, where the OR states, `In principle` - does not indicate that this is an actual legal fact.....It is ridiculous and unreasonable.

fermi

worried123 wrote: »

PS - Also, where the OR states, `In principle` - does not indicate that this is an actual legal fact.....It is ridiculous and unreasonable.

The Official Receiver/Trustee has every right to investigate any examples of "preference" to a creditor in the run up to bankruptcy. In fact they have a primary duty to do so because they must administer the bankruptcy estate fairly to produce the greatest realistic returns to all the creditors. The fact that one of these creditors is a member of family or a friend is irrelevant.

The primary insolvency legislation gives the OR all the powers they need to apply to the court to recover monies given in a deemed unfair preference, should this be considered an appropriate and cost effective action which would produce a meaningful return to the disadvantaged creditors.

Saying all of this, these duties of the OR/Trustee are/were mainly intended to rectify gross abuse of the system by companies/directors etc involving big money. For relatively small sums the OR will tend to try and seek a voluntary resolution and avoid any enforcement action, although they will go to court if they deem it necessary. If the other creditors are aware of the transaction they may also have a right to formally challenge the preference through the OR/Trustee.

Both Cooking on Gas and their step father need to explain the circumstances to the OR emphasising that:

* At the time of the payment a future insolvency was not anticipated.
* No preference or attempt to disadvantage other creditors was intended.

With a bit of luck the OR will see that nothing unfair was intended and that it will just be to much hassle to recover. But letters and statements from the OR on this must treated seriously. They are not an idle threat.

worried123

Fermi

Thank you for putting me straight at least....I can see where it is all coming from now - however, as you say, surely the OR will see that nothing dodgy etc has been done in this case and be lenient.

Cooking_on_Gas

There's no doubt that I take any correspondence seriously from the OR.

The repayment was made before my step father took the action of going down the BR route.

As usual I'll be honest and upfront about things and hopefully common sense will prevail, although that doesn't happen necessarily in law.

I'll let you know the outcome.

Thanks for your thoughts.

fermi

Cooking_on_Gas wrote: »

There's no doubt that I take any correspondence seriously from the OR.

I wasn't suggesting that you hadn't or wouldn't. Sorry if it came across like that, but I was trying to make a point for others that might read the thread.

Cooking_on_Gas wrote: »

The repayment was made before my step father took the action of going down the BR route.

As usual I'll be honest and upfront about things and hopefully common sense will prevail, although that doesn't happen necessarily in law.

I'll let you know the outcome.

Thanks for your thoughts.

Please do let us know, and I hope it works out ok.