The purpose of bankruptcy/insolvency proceedings is for reasons that the bankruptcy is a judicial attachment on all assets of the debtor for the benefit of his creditors, almost always resulting in the execution of such assets. A bankruptcy aims ensring the distributiin of the proceeds of exeution of the assets of the debtor to all its creditors, and with due observance of the rights of the debtor. Further, it serves to terminate all existing attachments and prevent future seperate attachments and executions by one or more creditors.
The overall design of The Insolvency Act is to give a distressed Debtor a second chance. Where the Debtor is a natural person, Part 11 of The Insolvency Act provides for Alternatives to Bankruptcy. One such alternative is for a Debtor to seek an Interim Order so as to make a proposal to his/her Creditors for a Composition in satisfaction of the debts or a Scheme of Arrangement of its financial affairs. This remedy is provided in section 305 of The Insolvency Act.
If you are served with a bankruptcy petition which seeks to adjudge you bankrupt in securing a debt that is allegedly owed by you, there are various grounds upon which you can rely on in opposing the steps that may result to the making of a bankruptcy order.
How can I oppose a bankruptcy petition?
A bankruptcy petition may be challenged based on the following substantive grounds:
- ·The debt alleged in the demand to be owing is genuinely disputed on substantial grounds by the debtor. If the debt is disputed, the petition will likely be dismissed by the court;
- ·however, unsuccessful arguments presented in an attempt to set aside a statutory demand cannot be reheard by the Court at the bankruptcy petition hearing;
- ·the Court can also dismiss the petition if it is satisfied that the debtor is able to pay all the debts to the creditor; or
- ·The company has a genuine right of set-off against the creditor which exceeds the amount claimed in the demand.
- ·One can argue that the petition is pre-mature; an abuse of the court process as the creditor is yet to exhaust recovery mechanisms available to it in law against the Debtor. Alternatives to bankruptcy are provided for under S. 14 of the Insolvency Act.
- ·More grounds to be added…
What is the procedure to oppose a bankruptcy petition?
The procedure to oppose a bankruptcy petition is to file a replying affidavit in response to the filed bankruptcy petition. in the R.A. you will be expected to provide grounds upon which you decline issuance of a bankruptcy order. The response is to be filed as per the timeline set out by the Insolvency Regulations and Act. This is usually days before the hearing date is set.
You are equally expected to file copies of evidence which support the reasons as to why you should not be declared bankrupt as soon as it is reasonably practicable.
Malicious Presentation of a bankruptcy Petition
A malicious bankruptcy petition is one that has been presented against a debtor for an improper or wrongful motive. A debtor that suffers a malicious petition can bring a Court claim for malicious prosecution against the petitioner.
Expert Bankruptcy Petition Lawyers
It is very important that you seek legal advice as soon as a bankruptcy petition is served upon you. To reduce failure risk, it is advised that you instruct specialist bankruptcy petition lawyers.
References
Rajendra Ratilal Sanghani v Schoon Ahmed Noorani [2018] eKLR available at http://kenyalaw.org/caselaw/cases/view/161951/
If you have any questions, or for request of PDF Version of the notes, please send a request mail to gechangazacharia@gmail.com
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