Petitions for sequestrationU.K.

7 Meaning of apparent insolvency.S

(1)A debtor’s apparent insolvency shall be constituted (or, where he is already apparently insolvent, constituted anew) whenever—

(a)his estate is sequestered, or he is adjudged bankrupt in England or Wales or Northern Ireland; or

(b)[F1not being a person whose property is for the time being affected by a restraint order or subject to a confiscation, or charging, order,] he gives written notice to his creditors that he has ceased to pay his debts in the ordinary course of business;

[F2(ba)he becomes subject to main proceedings in a member State other than the United Kingdom;] or

(c)any of the following circumstances occurs—

(i)he grants a trust deed;

(ii)following the service on him of a duly executed charge for payment of a debt, the days of charge expire without payment;

(iii)F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(iv)a decree of adjudication of any part of his estate is granted, either for payment or in security;

(v)F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(vi)F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F4; or

(vii)where any debt being paid under a debt payment programme under the Debt Arrangement and Attachment (Scotland) Act 2002 is constituted by a decree or document of debt as defined in section 10 (attachment) of that Act and the programme is revoked,][F5or

F6(vii). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

unless it is shown that at the time when any such circumstances occurred, the debtor was able and willing to pay his debts as they became due [F7or that but for his property being affected by a restraint order or subject to a confiscation, or charging, order he would be able to do so]; or

(d)a creditor of the debtor, in respect of a liquid debt which amounts (or liquid debts which in aggregate amount) to not less than £750 or such sum as may be prescribed, has served on the debtor, by personal service by an officer of court, a demand in the prescribed form requiring him either to pay the debt (or debts) or to find security for its (or their) payment, and within 3 weeks after the date of service of the demand the debtor has not—

(i)complied with the demand; or

(ii)intimated to the creditor, by recorded delivery, that he denies that there is a debt or that the sum claimed by the creditor as the debt is immediately payable.

[F8In paragraph (d) above, “liquid debt” does not include a sum payable under a confiscation order; and in the foregoing provisions of this subsection—

  • “charging order” has the meaning assigned F9. . . F9[F10. . . by section 78(2) of the Criminal Justice Act 1988][F11or by section 27(2) of the Drug Trafficking Act 1994];

  • F12. . . [F13 “confiscation order” and “restraint order” mean a confiscation order or a restraint order made under Part 2, 3 or 4 of the Proceeds of Crime Act 2002]].

(2)A debtor’s apparent insolvency shall continue, if constituted under—

(a)subsection (1)(a) above, until his discharge; F14. . .

(b)subsection (1)(b), (c) or (d) above, until he becomes able to pay his debts and pays them as they become due [F15; or

(c)subsection (1)(ba), [F16until] main proceedings have ended].

(3)The apparent insolvency of—

(a)a partnership shall be constituted either in accordance with the foregoing provisions of this section or if any of the partners is apparently insolvent for a debt of the partnership;

(b)an unincorporated body shall be constituted if a person representing the body is apparently insolvent, or a person holding property of the body in a fiduciary capacity is apparently insolvent, for a debt of the body.

(4)Notwithstanding subsection (2) of section 6 of this Act, the apparent insolvency of an entity such as is mentioned in paragraph (a) or (b) of that subsection may be constituted (or as the case may be constituted anew) under subsection (1) above; and any reference in the foregoing provisions of this section to a debtor shall, except where the context otherwise requires, be construed as including a reference to such an entity.

Textual Amendments

F3S. 7(1)(c)(iii)(v)(vi) repealed (1.4.2008) by Bankruptcy and Diligence etc. (Scotland) Act 2007 (asp 3), ss. 226, 227(3), Sch. 6 Pt. 1 (with s. 223); S.S.I. 2008/115, {art. 3(2)(3), Sch. 2} (with arts. 4-6, 9, 10 (as amended (with effect from 31.1.2011) by S.S.I. 2011/31, art. 5))

F5S. 7(1)(c)(vii) and word inserted (30.11.2004) by The Debt Arrangement Scheme (Scotland) Regulations 2004 (S.S.I. 2004/468), regs. 1, 46(b) (as amended by S.S.I. 2004/470, reg. 3)

F9S. 7(1): words in the definition of charging order omitted (3.2.1995) by 1994 c. 37, ss. 65(1), 69(2), Sch. 1 para. 10(2)(a)

F11S. 7(1): words in the definition of charging order inserted (3.2.1995) by 1994 c. 37, ss. 65(1), 69(2), Sch. 1 para. 10(2)(a)

F12Words in s. 7(1) repealed (1.4.2008) by Bankruptcy and Diligence etc. (Scotland) Act 2007 (asp 3), ss. 226, 227(3), Sch. 6 Pt. 1 (with s. 223)); S.S.I. 2008/115, art. 3(2)(3), Sch. 2 (with arts. 4-6, 10 (as amended (with effect from 31.1.2011) by S.S.I. 2011/31, art. 5))

F13Words in s. 7(1) substituted (24.3.2003) by virtue of Proceeds of Crime Act 2002 (c. 29), ss. 456, 458(1)(3), Sch. 11 para. 15(3); S.I. 2003/333, art. 2(1), Sch. (subject to transitional provisions in arts. 3-14) (as amended by S.I. 2003/531); S.S.I. 2003/210, art. 2(1)(b), Sch. (subject to transitional provisions in arts. 3-7)

F16Word in s. 7(2)(c) substituted (1.4.2008) by Bankruptcy and Diligence etc. (Scotland) Act 2007 (asp 3), ss. 36, 227(3), Sch. 1 para. 6 (with s. 223)); S.S.I. 2008/115, art. 3(1)(i) (with arts. 4-6, 10 (as amended (with effect from 31.1.2011) by S.S.I. 2011/31, art. 5))