Official Receiver not doing his duty - what can I do?

IANAL

You could always see what PayPal have to say about it...

Colin Wilson wrote in news: snipped-for-privacy@news.individual.net:

I've come into this kind of late, because I've not been reading the group today, but I presume this relates to SteveR...

Nothing of much use to say Steve, other than I spent a year annoying the liquidator of a former employer about problems in the liquidation, without too much joy. At the end of it all, he took me to one side and explained that all along he has seen exactly where I was coming from, that he had a somewhat less than favourable view of the chap concerned, but essentially he got away with everything.

I hope you have better results.

Sorry to rain on your parade, but you only have to notify lenders that you are a bankrupt if you want to borrow more than £250.

So your case probably fails at this point- are the goods she sells more than this?

Secondly, selling services/items with payment up front is NOT 'obtaining credit' sorry. It is "being paid for product/services, which have yet to be delivered". A small but distinct difference but very important in bankrupcy terms. Obtaining credit means borrowing money which needs to be returned.

As to the Insolvency Service being interested? They arn't - they are funded by cash recovered from the bankrupcy and won't bother investigating for anyhting less than £300k - as the cost of investigation outweighs any possible return

£500, actually, but in case law it's *cumulative* across all instances of obtaining credit.

Some are, yes. The point about it being cumulative means that if I were to order a £150 item, and you order a £200 item, and someone else orders another £200 item, that's £550 credit (see below) that she has extended. If she doesn't tell us *before* accepting the payment that she is an undischarged bankrupt, whoops!

Here is s.360(2) of the Insolvency Act 1986:

"(2) The reference to the bankrupt obtaining credit includes the following cases-

"(a) where goods are billed to him under a hire-purchase agreement, or agreed to be sold to him under a conditional sale agreement, and

"(b) where he is paid in advance (whether in money or otherwise) for the supply of goods and services."

Note part (b), as I said. This is a pretty clear and unambiguous statement that you are wrong.

They are also funded by the £350 that I paid as a "deposit". Money for nothing, I guess. If there were any justice, I'd get some value for my money...

I see what you are saying about the 'extending credit' bit, but am not convinced that it is cumulative, I got the impression from my bankrupcy that it was a 'per lender' thing. Ie, the most an individual lender would stand to lose would be £500, even if the cumulative total would be much greater. After all the penalties for a second bankrupcy would be much higher, set against a small possible risk for the lender.

I can't see how this cumulative thing would work, there would need to be guidance for instance on what to do as the cumulative total was reached - say you had borrowed £400 from one lender, then a series of 10 x £10 from other people. Would you then need to retrospectively inform ALL your lenders as well as the new one who you propose to borrow just a pound off?.

Another difficulty of this area is at what point do the goods and services become the property of the purchaser? If the seller has them in stock, you pay and they are yours - they just haven't been dispatched/collected? So has credit actually 'been extended'? If the seller has paid for the goods upfront, but they are at his wholesalers waiting to be 'dropshipped' to you, is the seller extending credit?

Also, if the seller is obliged to notify every buyer if 'credit is over £500'then: say if he runs a small operation selling trinkets at £1 per time, with payments received by paypal button, he has no way of tracking current instantaneous liabilty and no obligation to inform (under the cumulative way you suggest is the correct form) until he has sold (and not delivered) £500 worth of gear. If sales fluctuate around £500, he would be obliged to tell SOME customers during the day, but not others. (logistical nightmare? see 1) Also, assuming his usual sales balance never went anywhere near £500 and so he was never required to inform customers, then if someone decided to order £500 worth in one order, the seller would not have the opportunity to inform the buyer - he would only know of the order after the buyer had pressed the Paypal button and made the payment.

So since the area is a logistical minefield I can't see how your "cumulative £500" could work, or be fair to the bankrupt - the rules are not there to be punitive (to prevent the bankrupt trading at all), they are there to be a safety check - a balance of risk against punishment.

1) Yes i know software could keep the £500 limit enforced, but how much is that going to cost to have specially written?

The relevant part of the statute is s.360(1)(a) of the 1986 Act:

(1) The bankrupt is guilty of an offence if-

(a) either alone or jointly with any other person, he obtained credit to the extent of the prescribed amount or more without giving the person from whom he obtains it the relevant information about his status; or

(...)

And the relevant case law is, for example, R. v. Hartley, which, combined with s.360(1)(a), makes it clear that the magnitude of each credit transaction is irrelevant: it is the aggregate amount that matters, so that, if, on several occasions, the bankrupt obtains credit, if the total amount of the credit exceeds £500, whether or not any one transaction exceeds that amount, the bankrupt has committed an offence.

I'm also interested in your experience of living as an undischarged bankrupt, and what practical effect the restrictions had. If you want to share any of them, I'd be grateful. It would help me assess whether it was worth the effort and expense of doing the deed.

Actually, retrospectively informing lenders isn't good enough. It's clear from the case and statute law that the bankrupt has to tell them

*before* accepting credit from them. The only way the bankrupt can escape from the need to inform them is by paying each one off before taking on more credit, so as to avoid going over the limit.

It amounts to a nightmare scenario from a management point of view if the bankrupt is in a business like the debtor in my case, since she doesn't have control over when people pay money to her.

This is a good question, and the answer probably has a few tricky fuzzy edges.

I would tend to interpret that as a "yes" situation, since the seller has physical possession of both the money and the goods, even if the title to the goods has passed to the buyer.

This is almost the same situation, and (based on my non-lawyer understanding) the state of contract law seems to imply that there is no difference between the two cases. The seller has a contract with the wholesaler, but the buyer isn't a party to it, and it doesn't influence the contract between the buyer and the seller. If the wholesaler does a runner, that's the seller's problem, not the buyer's.

Because informing existing creditors retrospectively isn't good enough, the only viable solution to this is for the bankrupt to inform everybody, on the grounds that it might go over £500, and he doesn't want to unexpectedly have committed the s360(2)(b) offence.

That's the problem, and that's why it's easier to just tell them. At a quid a throw, most people aren't going to worry about the bankruptcy thing. When the cost of the goods reaches, say, a grand a pop, then it becomes more worrying for the customer.

Or, put another way, to ensure that the buyer is aware of the risk factor.

Yes, I'm aware that it is probably difficult to enforce this offence in some situations, but it just requires the bankrupt to keep very accurate records, and to either exert control over the borrowing or put up a preemptive warning. The dark side of that, however, is that it may put off some customers. I know *I* would be very reluctant to buy anything from an undischarged bankrupt.

Probably more than £500. :)