PROCESSING OF CREDITORS

CLAIMS AGAINST
BANKRUPTCY'S ESTATE
Division 20 Section 215 -245
Insolvency Bill 2015

WHAT DOES THIS ENTAIL?

Firstly a creditors claim is a
document that a creditor submits to
the bankruptcy trustee for the
purpose of proving a debt .
A debt , therefore is proved when it is
allowed by the bankruptcy trustee.

What debts are provable?

What is a debt ?
Those that are incurred during the
commencement of the bankruptcy.
After the commencement but before
the discharge, because of an
obligation incurred by the bankrupt
before that commencement.

Debts that cannot be

proved.
A fine , penalty or other made by a
court ordering the payment of money
that has been made following a
conviction. Such debts are not
provable
And those debts incurred during the
commencement of the bankrupt and
are not discharged when the
bankrupt
is
discharged
from
bankruptcy. [ examples ]

What is the procedure for proving

such debts ?
1. creditor to submit a claim form
A creditor including a creditor who has a
preferential claim who shall submit shall claim to
the bankruptcy trustee. This is done before a
certain deadline
This deadline may be,
(a) the time specified by the bankruptcy trustee
in notice given to the creditor
(b) the time specified in an advertisement
published by the bankruptcy trustee in a
newspaper

What then is required by the

creditor
The creditor is required to adhere to
any prescribed formalities.
He is also unless the Court make an
order to such, bear all costs incurred
as a result
The creditor may also amend or
withdraw the claim ,but an amended
claim has to comply with formalities
prescribed for the original claim.

Examination of the claim

2. Bankruptcy trustee is required to
examine creditors claim. Unless it is
concluded that no dividend should be paid.
After examination the B.T shall either wholly
or partially allow it, or wholly or partially
reject such claim .
May also require more evidence in support
of the claim or item .
if the claim is rejected the B.T shall notify
on the rejection and give reasons thereto

Powers of the B.T

B.T may ask for more evidence. He may summon
for examination and examine on oath or otherwise ,
1. a person who has submitted a creditors claim
2. a person who has made a deceleration or
statement as part of a creditors claim
3. a person who is capable of giving evidence
concerning a creditors claim or the debt to which
the claim relates.
If such persons fail to attend upon being
summoned a warrant of arrest is issued to appear
in court

What is the bankrupt or debtor

allowed to do?
The Bankrupt , can give the B.T a
notice to reject or allow a creditors
claim. A creditor may also give notice
to the B.T to reject a certain claim
made.
If the B.T fails to attended to such
counter-claim by allowing for the
rejection or otherwise within fourteen
days, the creditor or bankrupt may
apply to court for such order.

Powers of the Court

The official receiver, the bankrupt or
creditor may make an application to the
court for an order on the grounds that a B.T
improperly allowed a creditors claim.
The Court exercise its discretion by,
(a) court may make n order cancelling such
claim.
(b) reduce the amount claimed if it
considers that the claim was improperly
allowed in part or otherwise

 The court may also quash or vary

bankruptcy trustees decision rejecting
creditors claim
Where, upon an application made by a
creditor as a result of a rejected claim the
Court may consider the B.Ts decision was
wholly justified and therefor confirm it.
If it considers that the decision was only
partially justified it will quash the rest and
sustain the other half

Parties to proceedings relating to

creditors claims
If the applicant is not the B.T or
Bankrupt or a creditor such individual
may serve a copy of the application
on the bankruptcy trustee as a party
to the proceedings.

 The court may make an order as to

costs.
On the hearing of an application
made to it , it
May instruct a creditor to apply
additional costs to the creditor's
claim
Or direct that a specified amount of
costs be paid to the bankrupts
estate.

Secured creditors options in relation

to property that is subject to a charge

Who is a secured creditor?

Option 1
To realize the property by having it sold ( but
only if the creditor is allowed to do so under
the terms of the charge )
Option 2
To have the property valued and prove in the
bankruptcy as an unsecured creditor for the
balance due (if any ) after deducting the
amount of the valuation

 Option 3
The final option is that the creditor may
choose to surrender the charge to the B.T
for the general benefit of the creditors
upon which the creditor acquires the
status of an unsecured creditor
The failure on choosing such options
would then limit such secured creditor to
option 3 and hence forth it will apply.

Power of court to dispose of property

that is subject to a charge
The B.T makes an order to the court to enable
him/her to dispose of property as if it were
not subject to the security , but if it were
satisfied that the disposal of the property
would likely to provide a better overall
outcome for the creditors of the bankrupt.
So if the order relates to more than one
security the B.T shall apply the money from
the disposal in the order of the priorities of
the securities { tacking? }

Realization of property that is

subject to a security
A creditor who realizes property that is subject
to a charge may prove as an unsecured
creditor for any balance due after deduction
the net amount realized.
He becomes an unsecured creditor. This is
limited to , the following conditions;
1. he shall account to the B.T for any surplus
remaining after the debt has been cleared also
the interest payable and any proper payments
payable to the holder of any other charge over
the property.

Valuation of charge held by creditor

and claim for balance due
Remember
that
the
creditor
after
valuation of the property that is charged
may become an unsecured creditor.
However, before this the creditor has to
make sure that the claim is made in the
prescribed claim form, contains full
particulars of the valuation and the debt
,full particulars of the charge, identifies
the document that substantiate the debt
and the charge.

Offences for secured creditor to

make false claim
Make or authorizes some kind of
falsity under the charged valuation
claim form
Omits any material fact.
A secured creditor whose liability
falls within the stated parameter will
be liable on a fine of 2M or
imprisonment
for a term not
exceeding five years or both.

B.Ts powers when secured creditor

values property subject to charge and
proves for balance

if a creditor who holds a charge over

property of a bankruptcy values the
property and seeks to prove for the
balance due, the bankruptcy trustee
shall, accept the valuation and the
creditors claim.
(a) reject
(b) accept

 Secured creditor who surrenders

charge may with approval of the
court withdraw claim or submit a new
claim
This refers to those creditors who
have chosen Option 3.
Withdraw the surrender and rely on
the charge or submit a new creditors
claim under this Division.