solicitor trying to claim money from debt that was owed to me for a receiver

[Tige]

I find myself in a strange position, i borrowed some money to a friend, which he promised to pay me back when his pension matured, I was ok with that as it was only for a few months, he paid me back in october 2021 via a bank transfer, all was good, then unbeknown to me in April 2022 he decided to go personally bankrupt, i found out when i got a letter from a solicitor telling me they are acting for the official receiver and that the £3,000 pounds transferred to me in oct 2021 was paid to me as a preferred creditor and they are challenging the payment to recover the said money, they have told me i have to pay the money to the receiver by the 15th of aug or they will take steps to recover the money. £2,000 pounds of the money was to pay for a lambretta scooter the friend wanted to buy from me, and a further £1,000 was for him to buy an engine for a vehicle he owned that he wanted to get repaired so he could sell it. I now find myself the victim here for helping some one out, and i have searched for information, but find it difficult to get any info as this is an odd one , any advise would be appreciated.

[atticus]

First of all, you need to understand the law here. Insolvency law aims to treat all creditors equally. There is not enough money to pay them all, so they get paid the same "pro rata", i.e. each gets the same payment per £ owed - if they get anything at all.

In order to protect the application of this 'pari passu' principle, there are anti avoidance measures. These include undoing payments made in the period before the bankruptcy order is made, being payments with the intention of putting that creditor in a better position than creditors generally.

So that explains the basis of the claim against you.

I will come back a little later (or maybe someone else will) with an outline of possible arguments you may use.

[DE DOGS]

I Ponder Atticus. Would he would need to show proof that he loaned the £3000, also what the loan was for, that should clear the problem ?.

[dslippy]

The existence or purpose of the debt is not being challenged, only the circumstances of the repayment, so it would not cllear the problem. If the money was paid from a pension fund arrangement, what happened to the rest?

[atticus]

DE - no. The claim is not on the basis of a gift, but on the basis that this creditor was repaid, preferring him to other creditors.

[Tige]

I have asked him why he chose to file for bankruptcy, His explanation was that he was taken to court by a previous landlord where he ran his garage business, The court paperwork was delivered to a different address to the one where he resides, and therefore could not reply, and judgement was made against him for the sum of £126,747.66, i was not aware of this at the time i loaned him the money or when he paid me back the £3,000 from his pension fund, i only became aware of it after getting the letter. i would have thought that he would have been advised by someone who also dealt with his bankruptcy, I would have expected them to have informed him of this situation, i just find myself in an impossible position where i will have to lose £3,000 of my savings for something that has nothing to do with me.

[atticus]

The law that applies here is found in section 340 Insolvency Act 1986 https://www.legislation.gov.uk/ukpga...ansactions-etc

Section 341 makes it clear that the "relevant period" is 2 years before the date of the bankruptcy petition - the timing of the repayment to you is within that period.

s340(4) may give you an argument, namely the motivation of the debtor in paying you.

The court shall not make an order under this section in respect of a preference given to any person unless the individual who gave the preference was influenced in deciding to give it by a desire to produce in relation to that person the effect mentioned in subsection (3)(b) above.

I would consider replying to the solicitor along the following lines.

1. You lent money on the strength of a promise to be repaid a few months later when the borrower would be able to draw down from his pension.

2. The borrower duly repaid you when able to do so from that source.

3. [Find out the date the borrower became aware of the judgment - this could be vital, particularly if he only learned of it after paying you back. If so, state that the borrower only learned of the judgment against him after repaying you, and therefore had no reason at that time to think he would have to make himself bankrupt].

4. Therefore when repaying you the borrower was not motivated by an intention to prefer you to other creditors.


But beware -litigation about this will be expensive. Legal costs on each side will almost certainly exceed the sum being claimed. This may also be a reason for the Official Receiver to think twice about further action. But a case like this may not be dealt with in the Small claims track, due to complexity, and so the loser may end up paying the winner's costs.

[atticus]

NB 340(5) refers to an "associate" of the debtor. "Associate" is defined in s435. I don't think the OP falls within that definition.

https://www.legislation.gov.uk/ukpga...45/section/435

[Tige]

He has spoken to me and said that he did not find out that the judgment had gone against him until December 2021, he also says he has proof of that in the form of a letter, which he said he will retrieve from the receiver, But if he cant do that would a letter from him with that information in it suffice,as proof he did not know in October that he had other creditors.

[Tige]

I don't really understand the associate definition.

[atticus]

In the light of your further information I have amended the points you can consider making to the solicitor.

1. You lent money in [month/year] on the strength of a promise to be repaid a few months later when the borrower would be able to draw down from his pension.

2. The borrower duly repaid you when able to do so from that source. He did this in October 2021.

3. You understand that it was in December 2021 that the borrower learned of the claim and judgment against him that led to his applying for his own bankruptcy. Therefore he had no reason in October 2021 to think he would have to make himself bankrupt.

4. It follows that when repaying you the borrower was not motivated by an intention to prefer you to other creditors. This means that section 340(4) Insolvency Act 1986 applies and the court must not order you to repay any money.

[atticus]

I don't really understand the associate definition.

Do you come within subsections 2,3,4,5 or 8? Your previous posts suggest not.

[Tige]

I have also been made aware that the receiver got my details from the bankruptee, from a diary that he kept, in which he has the details of the loan, borrowed and paid back, but both the loan and the repayment where in cash, not bank transfer, so other than that diary the receiver has no proof i received £3,000 from my friend. I need to be very careful how i respond to the solicitor in the first instant.

[atticus]

So the OR has the dates*. I don't really see your point.

* and you said you were repaid by bank transfer.

[Tige]

So the OR has the dates*. I don't really see your point.

* and you said you were repaid by bank transfer.

That was my immediate assumption from the redacted back docket, However that was his withdrawal slip from the bank where he drew cash , ive checked my bank statements and no payment was made via the bank, He paid me cash, it was a while back and trying to remember all the details from 2021 i was unclear, The only proof that the receiver and the acting solicitor has that i was paid at all was in the diary of my friend which the receiver has. in actual fact the receiver has no evidence that i received any payment at all.