Paying Creditor before Bankruptcy hearing

Hi, I wonder if you could help me, I am facing a final bankruptcy hearing in November. I owe a number of creditors substantial amounts of money, however one creditor went to the High Court and had a court order against me for costs from a High Court hearing, as it was getting very tough with this particular creditor, I just decided to pay them as it was one of the lowest amounts, however the creditor is resolute that they remain a "supporting creditor" and still wants to participate and give evidence in the final bankruptcy proceedings as a "supporting creditor".
They say although they have received the money, it doesn't remove them as a supporting creditor, as it is treating them as a "preferential creditor" and they can still appear and make submission to the court at the final proceedings.
Is this true or are they bluffing, can they still be a creditor in the final bankruptcy hearing if they have received payment?

Replies

  • sourcratessourcrates Forumite
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    You should not be paying anyone, preferencing one creditor over another is a big no no when your about to go bankrupt, it may have repercussions for you.
    Everyone should be treated equally, and that normally means not paying anything to anyone.
    You may need to explain this to the OR further down the line, so have your excuses ready.
    Ex MSE Board Guide.

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  • Minkym00Minkym00 Forumite
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    Some more information would be helpful. Who is making you bankrupt - one creditor or is there a group of them? How much did you pay this creditor? Was this creditor a part of any group of creditors petitioning for your bankruptcy before you paid them? How much is the total debt?

    As sourcrates says, paying one creditor puts them in an unequal position and could be classed as a misconduct. However it would be looked at in terms of "did the bankrupt benefit from it?" If you didn't, the OR would just take action to reverse the payment and that would be that (especially if it's a small proportion of the total debt and the creditor was not a "connected party" i.e. family member etc).
    If they are no longer a creditor I cannot see how they can class themselves as one and rock up to the hearing and give evidence. They can't have it both ways - if they want to be creditor then they should give you the money back! If they are not a creditor then they are not a supporting creditor either. If they do turn up at the hearing then you should object to their giving evidence.
  • FinlaySFinlayS Forumite
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    Sorry for delaying in replying, in answer to your questions Minkym00
    1) Who is making you bankrupt - one creditor or is there a group of them? Group of them, about 42 in total
    2) How much did you pay this creditor? £16'000, I had to pay their legal costs from an unsuccesful hearing.
    3) Was this creditor a part of any group of creditors petitioning for your bankruptcy before you paid them? Yes, they had served a statutory demand (SD4) as part of the ongoing bankruptcy proceedings, and was a creditor.
    4) How much is the total debt? The total debt owing to creditors is £4.6 million.

    I think since I last posted, I have better understood their argument, they are saying they are owed the £16'000 and have confirmed they have received it from me and told the court that, but they say: they still remain as a creditor as the court has not made a validation order (no idea what that means!!!) and there is nothing to stop the official receiver rescinding the payment if I was made bankrupt and has "various authorites" to support their case. (again no idea).

    They argue that although they have been paid, it goes against the "pari passu" (?????) and the court will tell them to "hold" the money I paid them on trust, (again no idea what the means), until the outcome of the bankruptcy has been determined.

    This is all very confusing to me and I just don't understand how someone who I have paid is still a creditor and can still appear and speak at the bankruptcy hearing.

    Any advice appreciated.



  • MWTMWT Forumite
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    They are acknowledging that the payment you made to them will most likely be considered as preferential and subject to being reversed.
    In short they are holding the money for now but don't believe they will be able to keep it so they are remaining on the list to protect their position.
    They know full well that you shouldn't have paid them even if you didn't realise that.
  • Minkym00Minkym00 Forumite
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    Thanks for the info which gives a much clearer picture. Pari passu is “equal footing” so, by making the payment to this creditor, you have put them in an unequal position (hence the term preference payment). This is payment that the OR will seek to reverse to right that balance, but this much i think you know already. In that respect they have a valid argument. 

    However I don’t know what advice you are seeking here? What are you worried about? At the bankruptcy hearing all the judge is going to do is confirm that the stat demand has been correctly served, hear any evidence from you that you are not insolvent or can pay the debt immediately, and then make the order if they adjudge you to be insolvent. The judge isn’t interested in hearing from every creditor, they will already have had a report and witness statements and read through them. If this creditor has an axe to grind about how the debt came about then they can tell the OR. 
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