Bankruptcy petition an abuse of process
You may remember an earlier post Liquidation and bankruptcy petition dangers, where I highlighted a legal decision emphasising that a petition is not to be used to pressurise a debtor into paying one creditor.
Ruth has asked about how to deal with this situation in practice:
Can I get an emergency injunction to prevent a supplier who is abusing process petitioning for my bankruptcy over a disputed debt? I sent them a cheque with a letter stating it was in full and final settlement of the debt and the supplier banked the cheque. Now they are saying I still owe the balance and have taken out a bankruptcy petition. I don't want it to get publiciced or it will damage my reputation. Can I stop them with an injunction?
Unlike company winding-up petitions, bankruptcy petitions are not normally advertised, but what are your suggestions or observations? Please comment below.
A creditor's threat to 'take out a bankruptcy petition' against a sole trader for a debt disputed on genuine grounds is an empty one. Generally speaking the creditor must personally serve a statutory demand as a prerequisite to a bankruptcy petition and the alleged debtor then has 18 days to apply to Court to set it aside if it is not withdrawn. Having tendered payment in full and final settlement (subject of course to proof) should at least give rise to an arguable defence to a claim on the balance of an alleged account which should be sufficient to have any demand set aside, with an order that the creditor pay the alleged debtor's costs of the application. Of course, if the alleged debtor has ignored a properly served demand, that is a different matter and the debtor should seek specialist advice.