sole trader threatening to proceed to bankruptcy

[Smudge18]

I recently instructed a solicitor to send "Letter Before Action" to a sole trader who installed a new fence. Attempting to get full refund due to poor workmanship and have 3 third party reports confirming fence needs taking down and re-installing. He initially agreed to part refund and take back fence leaving me £1,000 out of pocket and no fence so I declined. Solicitor informed him summons will be issued unless full refund plus costs of report and stress & inconvenience is paid. He has responded stating he is not in a strong enough position to pay full amount as it would result in having to proceed with bankruptcy proceedings and offered £100 monthly payment. If I proceed to small claims court and he decides to declare bankruptcy once he receives court papers, can I still continue with my claim. If he did proceed and apply for bankruptcy, is there any possibility it could be declined as it appears the only reason he will take this route is to prevent me from gaining full refund and I believe he is testing the water. How would I even know if he had gone bankrupt if I proceed to small claims court, is there a way of finding this out without expense to myself. Any help would be appreciated.

[atticus]

Sorry, the short answer is "no".

If a bankruptcy order is made, civil action may not be continued. You would have to submit a "proof of debt" to the man's trustee in bankruptcy (probably this will be the Official Receiver).

I have never heard of a debtor's bankruptcy petition being refused.

To monitor whether he follows through with his threat (or bluff?) you could periodically check the Individual Insolvency Register here: https://www.insolvencydirect.bis.gov.uk/eiir/

[R0b]

What has your solicitor advised on the situation? Not that I'm generalising as the sole trader may very well be in a bit of financial trouble but I wouldn't be surprised if the sole trader is bluffing in an attempt to see if you will just walk away and do nothing.

I'm not all too familiar with bankruptcy procedures but I do know a little bit and if the sole trader were to bring a bankruptcy petition, it could have a pretty damning effect on him (which he may or may not be aware of). For example:

- Any money in his accounts no longer belong to him and are vested in a 'bankrupt estate'. This also extends to any homes he may own, vehicles, stock, insurance policies, shares, pensions (with some exceptions) etc.

- If a bankruptcy order is made, the sole trader is known as an undischarged bankrupt until the debts are cleared. In practice this could pose him a problem because:
* some banks don't allow undischarged bankrupts to have a bank account.
* Unable to obtain credit or loan above £500 without disclosing that they are an undischarged bankrupt. it is a criminal offence for failing to do so.
* They can't act as a director for a limited company or be involved in the management, formation of a company.
* They can't trade under a different name to the one which the bankruptcy order applies to without first disclosing their insvolvency position and is also a criminal offence.

- There's other various obligations such as disclosing income, prohibited from concealing property etc.

As I'm sure you'll agree, would the trader want to really go down the bankruptcy route for the sake of a small sum of money? He would be in a much worse position and would still need to pay back his debts anyway.

Personally, unless there is other information you have to suggest he is being serious about a bankruptcy petition, I would call his bluff and press ahead, although you may want to drop your legal rep to save costs as this type of claim shouldn't be too difficult for you to manage yourself, but that's your choice. alternatively, you could run a credit check on him and maybe instruct an agent to see what kind of assets the trader has, check his social media to see what he posts publicly and decide if what he is saying tally's up - he may say he's in financial difficulty but what if he is posting holidays abroad several times a year or driving a fancy car or brand new van or spending money at lavish restaurants. none of that would appear to suggest he is in difficulty but note that it doesn't always indicate he is well rather it would give you an idea on how you want to proceed.

Atticus raises an interesting point on whether the court could refuse a bankruptcy order. I'm not aware either but I suppose it's not unrealistic to oppose an order on the basis that the sole trader is deliberately seeking to avoid liability towards yourself and if he is genuine not in financial trouble such that he can't afford to pay his debts, it may be argued that the bankruptcy petition is an abuse of process.