Stephen Gold, a retired judge and seasoned author, has been sharing his legal wisdom with the public in the Daily Mail. Previously he covered the basics, today he looks further at bankruptcy and debt.
Bankruptcy: When It’s Not An Option for Creditors
Gold points out that creditors threatening to bankrupt someone for debts under £5,000 are bluffing. The cost for a creditor to start bankruptcy proceedings is high – court fees, a hefty deposit, and additional legal expenses can total over £3,500. It’s a risky and expensive move, especially if the debtor is, as Gold puts it, ‘beanless’ – without funds or assets to claim.
The ‘Beanless Defence’: A Judge’s Creative Solution
The ‘Beanless Defence’ – a term coined by Gold himself – is a straightforward plea to the court. It’s telling the judge you’re broke, with no prospects of improvement. If the court agrees, it could mean the end of bankruptcy proceedings, as shown in cases like Lock v Aylesbury Vale District Council and Re Edgeworth Capital v Maud.
However, if you do have a way to pay off your debts – perhaps through a sudden windfall or a generous relative – the court may grant you a short reprieve to settle your accounts.
Sued for Debt? How to Buy Time
If a creditor opts to sue instead of pushing for bankruptcy, they’re likely after a court judgment which could result in wage garnishment or a visit from the bailiffs. Here, Gold suggests a tactical move: using the pre-action debt protocol to your advantage. This protocol requires creditors to provide detailed claims and allows you a reasonable time to seek legal advice.
Ignoring the protocol doesn’t automatically shield you from the claim, but it can give you more time to prepare a defense or to negotiate with the creditor.
The Debt Respite Scheme: A Lifeline for Debtors
The Debt Respite Scheme, also known as the ‘Breathing Space’ initiative, is Gold’s trump card for debtors. It’s a temporary freeze on all debt enforcement actions, providing precious time to sort out financial affairs. The scheme has two options: a standard Breathing Space moratorium, lasting up to 60 days, and a Mental Health Crisis moratorium, which extends through the duration of the crisis plus 30 days.
During these moratoria, certain debts like taxes and utility bills must still be paid, but it stops most debt collection in its tracks.
A Cautionary Tale for Creditors
Gold concludes with a stern warning to creditors: the Debt Respite Scheme is potent. He recounts a High Court case where a creditor’s attempt to sell a debtor’s flat was overturned due to an active moratorium. The sale and eviction were declared null, showing the scheme’s power to upend even advanced stages of debt collection.
What This Means for You
If you’re drowning in debt and bankruptcy looms, Gold’s advice offers several lifelines. Remember, creditors can’t always take you to court, especially for smaller sums. And if they do, protocols and schemes like the Debt Respite Scheme can give you the breathing space needed to get back on your feet.
For creditors, the message is clear: tread carefully and check for active moratoria before taking action. The landscape of debt collection has changed, and being informed is key to navigating it successfully.
In the world of debt, knowledge truly is power, and thanks to Stephen Gold’s insights, debtors and creditors alike can navigate these turbulent waters with greater confidence and understanding.