It might not be common knowledge, but a bankruptcy can be cancelled – or subject to an annulment, to use the proper term. This is a process that can only be carried out by a court, in specific circumstances.
An individual can apply to have his or her bankruptcy annulled if they feel the bankruptcy order should never have been made, because, for example, the proper steps were not taken at the time the bankruptcy order was made, or if the bankrupt has fully paid off all debts and fees, or at least guaranteed them to the court’s satisfaction. Alternatively, an annulment could be made if an agreement has been made via an “individual voluntary arrangement” (IVA) with the creditors to repay the debts.
So how would you go about annulling a bankruptcy? Basically, by filling out a form, at least initially. Form 7.1A, an application notice, can be obtained from the Insolvency Service, or possibly from the court dealing with your bankruptcy. Then you must make a statement of truth, explaining why you want an annulment. The court will then set a date for your application, and you will attend the hearing.
Before that hearing, the official receiver needs to be informed of the date so that they can also attend. They will also need a copy of your statement of truth. They will send a report to the court to confirm if debts have been paid and the report may also comment on the individual’s conduct during the bankruptcy.
After the hearing, fees and expenses will have to be paid, and the court will have decided who is responsible for these costs. It’s important though that this is sorted before the annulment, so all sides know where they stand, so this is a crucial task for the official receiver to ascertain. If your creditors have agreed to an individual voluntary arrangement, then a similar application would be made to the court, and similar procedures would apply to when annlument is claimed because due process wasn't followed.
The effect of an annulment:
The general effect is that in terms of the law, the bankruptcy order was never made, and you will revert to your pre-bankruptcy status. Any property sold will remain that way, but other assets will be returned.
The record of the bankruptcy will be wiped from the Insolvency Register 5 days after the order is cancelled. If the order has been annulled in favour of an IVA, then the details of this will be added to the register instead. As bankruptcy petitions/orders are registered at the Land Registry too, this needs to be cancelled on their records too, though usually it is up to the individual to inform them to do this.
It will also be the former bankrupt’s responsibility to get the bankruptcy removed from their credit file. If the bankruptcy has been replaced by an individual voluntary arrangement, then this will be listed on file instead.
Any decision made by a court can be appealed. To make an appeal though, the individual must have the permission of the court which has jurisdiction to hear the appeal – a court with higher authority. Once the original decision has been made by the court, there is 21 days to appeal.