IVA Successfully Overturned
Greenhalgh Kerr successfully overturned a debtor’s IVA and obtained a bankruptcy order, in order to allow trustees in bankruptcy to investigate a suspicious property transaction.
Greenhalgh Kerr were instructed by a finance company to pursue a bankruptcy petition for more than £450,000 due under various hire agreements that had been personally guaranteed by the debtor.
The debtor sought to avoid bankruptcy, by proposing an individual voluntary arrangement (“IVA”). We reviewed the proposals and highlighted several areas of concern. The proposed IVA excluded the debtor’s residential property from the assets available to creditors, on the basis that the debtor had, prior to the petition, transferred the bulk of his beneficial interest to his wife (“the Transfer”). Further, the debtor claimed to owe substantial sums to companies controlled by himself and/or his wife (“the Associated Creditors”).
At an initial hearing of the petition, Greenhalgh Kerr raised these concerns, and obtained orders directing the debtor to provide specific disclosure as to the Transfer, and his indebtedness to the Associated Creditors. The debtor provided limited documents, but failed to provide the specific disclosure required. Shortly thereafter, the IVA was approved by creditors (despite our client voting against the IVA).
We advised our client that the IVA could be challenged on the basis that there was material irregularity in the approval of the IVA, and that the IVA unfairly prejudiced our client’s interests.
Greenhalgh Kerr filed an application pursuant to s262(1)(a) and (b) of the Insolvency Act 1986, seeking the revocation of the IVA, which would enable our client to seek a bankruptcy order on their existing petition. We filed detailed evidence noting that a trustee in bankruptcy could potentially challenge the Transfer as a preference or transaction at undervalue. We also highlighted deficiencies in the purported loan and guarantee documents relied upon by the Associated Creditors, noting that the documents provided did not justify the sums claimed to be owed, and that without this overstatement the required 75% threshold would not have been reached.
Following a two-day hearing, Greenhalgh Kerr obtained orders revoking the IVA, and declaring the debtor bankrupt.
Greenhalgh Kerr’s in-depth knowledge of the Insolvency Act enabled us to protect our clients’ interests by successfully overturning the IVA, thereby allowing a Trustee in Bankruptcy to properly assess the validity of the Associated Creditors’ claims, and to investigate the Transfer, in order to maximise the assets available to creditors.