BANKRUPTCY

Oftentimes, the terms insolvency and bankruptcy are used interchangeably. However, in Trinidad and Tobago, insolvency and bankruptcy have distinct meanings, albeit they generally hint to similar circumstances. This article will provide a spotlight on bankruptcy and how the law governing it can personally impact an individual.

WHAT IS BANKRUPTCY

In 2014, the Bankruptcy and Insolvency Act, Chapter 9:70 (the “BIA”), was proclaimed and all Parts except Part XI (which deals with International Insolvencies) were brought into effect. It was said that the legislation’s primary aim related to the rehabilitation of corporate and individual debtors alike who found themselves in financial difficulties.

Bankruptcy is a procedure under the BIA, which is designed to make available financial relief to individuals, corporations and partnerships who are facing insurmountable debt burdens. Importantly, it provides an avenue through which the debtor can either eliminate or repay their debts whilst being protected by the Court. This is accomplished by the halting of legal actions of creditors (i.e., a stay of proceedings).

The following terms, which appear frequently in the BIA, are worth noting:

• Assignment – speaks to the process where a financially distressed party would transfer its assets to a third-party fiduciary (typically a trustee) for liquidation and distribution to creditors.
• Bankrupt – means a person who has made an assignment or against whom a receiving order has been made under Section 5(10) of the BIA.
  Insolvent person – a person who is not bankrupt and whose liabilities to creditors provable as claims under the BIA amount to not less than four thousand dollars.
• Debtor – an insolvent person and any person who, at the time an act of bankruptcy was committed by him, resided or carried on business in Trinidad and Tobago and, where the context requires, includes a bankrupt.
• Receiver – means a person who has been appointed to take, or has taken, possession or control of all or substantially all of the inventory, accounts receivable, or other property of a debtor that was acquired for, or is used in relation to, a business carried on by the debtor.
• Receiving order – means an order of the Court made under any law that provides for or authorises the appointment of a receiver or a receiver-manager.

PERSONAL BANKRUPTCY

The bankruptcy process is initiated by filing a petition in the High Court. In said petition, there will be a variety of information that will need to be included – personal information and a statement of affairs (assets and liabilities, income and expenses) must be provided.

Generally speaking, personal bankruptcy is of a voluntary nature – i.e., where the debtor takes the lead. In voluntary bankruptcy proceedings, debtors either make an assignment to the benefit of their creditors or they present a bankruptcy petition to a Court.

In some instances, creditors may submit petitions regarding the debtor. These bankruptcy proceedings are involuntary in nature. Section 5 of the BIA provides that where the debtor has committed an act of bankruptcy and the amount owed by the debtor is not less than $10,000.00 (TTD), their creditors are empowered to file a petition for a receiving order to the Court within six months of the act of bankruptcy. Section 4 of the BIA outlines the relevant acts of bankruptcy – some noteworthy ones include where:

• The debtor makes a transfer or assignment of their property to a trustee for the benefit of their creditors;
• The debtor makes a fraudulent transfer of their property;
• The debtor makes any transfer of their property or creates any charge thereon, which would under the Act be void if they were adjudged bankrupt;
• The debtor gives notice to any of their creditors that they have suspended or intends to suspend payment of their debts; and
• With intent to delay creditors, the debtor departs Trinidad and Tobago, departs their dwelling house, or otherwise makes themselves absent.

Following filing of the petition, the Court if it deems it necessary, may either grant a bankruptcy order (in voluntary proceedings) or make a receiving order (in involuntary proceedings). Accordingly, a trustee will then be appointed to manage the bankruptcy process. The role of the trustee is to oversee the liquidation of assets and thereafter, distribute the proceeds to creditors.

Provided that the terms of bankruptcy are complied with, the individual may receive a discharge, releasing them from the obligation to repay most of their debts. The discharge process and timeline vary depending on the circumstances and compliance with the bankruptcy rules.

However, it is worth noting that declaring bankruptcy may negatively impact the individual’s future employment opportunities. Moreover, individuals are prevented from being a director of a company whilst bankrupt in Trinidad and Tobago.

Bearing this in mind, although bankruptcy can aid in providing an indebted individual with a fresh start, it is important to seek professional advice to determine whether it is the right option for you.