8) i) ii) iii) iv)

Bankruptcy Acts of Bankruptcy Procedure in Bankruptcy Discharge of a debtor Disabilities of undischarged debtor

INTRODUCTION The word refers to the legal status of an individual against whom an adjudication order has been made by the court principally because of his inability to meet his financial liabilities. And this adjudicating order is a judicial declaration that a debtor is insolvent and has the effect of imposing certain legal disabilities upon him and of divesting him of his property for his creditors benefit. Blackstone defines bankruptcy as A proceeding by which, when a debtor cannot pay his debts or discharge his liabilities or the persons to whom he owes money or has incurred liabilities cannot obtain satisfaction of their claims, the court in certain circumstances takes possession of his property by an officer appointed for the purpose, and such property is realized and distributed in equal proportions among the persons to whom the debtor owes money or has incurred peculiar liabilities AIMS OF BANKRUPTCY LAW. The objects of Bankruptcy law are i) protection of honest debtors and ii) !afeguarding the interests of creditors by means of e"uitable distribution of the assets of an insolvent debtor among creditors. #n his book $The Principles of Bankruptcy %aw&' Thomson sees the a!n "#$%ct of bankruptcy law as i. To secure an e"uitable distribution of the property of the debtor among his creditors according to their respective rights against him. ii. To relieve the debtor of his liability to his creditors and to enable him to make a fresh start free from the burden of his debtors and obligations. iii. To protect the interests of the creditors and the public by providing for the investigation of the conduct of the debtor in his affairs' and for the imposition of punishment where there has been fraud or other misconduct on his part. #n (enya' Bankruptcy is regulated by the Bankruptcy Act )*+,-)' %aw of (enya .ap. /,' revised in *+01. This Act is based largely on the 2nglish Bankruptcy Act of *+10. ACTS OF BANKRUPCY & 'OW TO B( BANKRUPT. To be declared bankrupt' it must be proved that you can3t pay your debts' manifested by a commission of an act of bankruptcy. *. C"n)%y!n* "r a++!*n!n* a,, pr"p%rty t" a Tru+t%% -"r t.% #%n%-!t "- .!+ cr%/!t"r+ *%n%ra,,y !ection ,)*) )a) provides that if in (enya or elsewhere a debtor makes a conveyance or assignment of his property to a trustee or trustees for the benefit of his creditors generally' he commits an act of bankruptcy. To constitute an act of Bankruptcy hearing there must be a
1

conveyance or an assignment of the whole or substantially the whole of the debtor3s property. The assignment must be for the benefit of all creditors generally and not just a class. 4e 5eghji 6athoo )*+0-) 2.A. /0A creditor who has recogni7ed a Deed of Arrangement wherein a debtor has agreed on a plan of repaying the debt cannot rely on that Deed as an act of bankruptcy. 1. Frau/u,%nt C"n)%yanc%8 provided for under !ection ,)*))b)' this second act of bankruptcy is that if a debtor makes a fraudulent conveyance' gift' delivery or transfer of his property or any part thereof. 9nder the BA a conveyance is fraudulent if it confers on one creditor an advantage which he would not have under the Bankruptcy %aws or which tends to defeat or delay creditors irrespective of whether the debtor had any dishonest intention although this may be present. The transaction may be $a conveyance' gift' delivery or transfer& of property and this includes mortgages or pledges as well as actual conveyances and assignments. The conveyance need not be for the benefit of any creditor and such transfers are fre"uently made for e:ample to a member of the debtor3s family. The conveyance need not be of the whole of the debtor3s property. The principles for determining whether a conveyance is fraudulent under the Bankruptcy Act may be summari7ed as follows8 ; ; <here a debtor transfers all or virtually all his assets in payment of an antecedent debt without receiving any present return for them this necessarily defeats or delays his other creditors and is a fraudulent conveyance even when the transaction is honestly entered into ; <here a debtor transfers all his assets for a full present consideration this is not per se a fraudulent conveyance since the effect is merely to change the nature of the property to which the creditor look for satisfaction but a fraudulent intent for e:ample to abscond with the proceeds of the sale could be proved if it is in fact e:isted or it might shown that that so called sale was a sham designed to turn a creditor from an unsecured into a secured creditor at the e:pense of other creditors and in this latter case that will be fraudulent. ; <here a debtor transfer3s part of his assets in payment of an antecedent debt' the fraudulent intent must be proved and this will depend upon whether or not there is sufficient property remaining after the transfer to enable the debtor to continue in business and thus satisfy his other creditors. !econdly this will depend upon whether the debtor is insolvent or not at the time and lastly it will depend upon whether or not the conveyance has the effect of leaving him insolvent. ; <here a debtor mortgages or otherwise charges all his property to secure an antecedent debt' this is conclusively presumed fraudulent as against the other creditors. ,. Frau/u,%nt Pr%-%r%nc%0 !ection , )*) )c) of the BA as read with !ection =+)*). #f in (enya or elsewhere he makes any conveyance or transfer of his property or any part thereof or creates any charge thereon which would under the BA or any other Act be void as a fraudulent preference if you are adjudged bankrupt' this constitutes an act of Bankruptcy and basically under !ection =+)*) it is provided as follows8 $2very conveyance or transfer of property or charge thereon made' every payment made' every obligation incurred and every proceeding taken or suffered by any person unable to pay his debts as they become due from his money in favour of any creditor with a view of giving such creditor guarantor for the debt due to such a creditor a preference over the other creditors is deemed to be
2

fraudulent and is void as against the trustee in bankruptcy if the person effecting the transaction is adjudged bankrupt on a petition presented within 0 months after the date of the transaction. =. L%a)!n* K%nya1 K%%p!n* '"u+% 2 S! !,ar Act+ ' BA !ection ,)*) )d) is yet another act of bankruptcy. >ere if a debtor departs from (enya or if out of (enya remaining outside (enya or departing from a dwelling house or otherwise absenting himself or beginning to keep house is constituted as an act of bankruptcy. #n order to establish this act of bankruptcy the creditor must prove that it was the debtor3s intention to defeat or delay his creditors but it is not necessary to show that any creditor was actually defeated. The intent may be presumed if it is a natural conse"uence of the debtor3s act that the creditors will be defeated or delayed. This ac?t of bankruptcy has , limbs a. Departing from or remaining out of (enya' where a person domiciled in (enya leaves the country after being pressed for payment by his creditors' there is a strong presumption that his intention is to defeat creditors. >owever' this is not so if he has a permanent residence abroad at which he remains or if a person domiciled abroad leaves (enya to return to the country of his domicile. b. The second limb of bankruptcy is departing from a dwelling house or otherwise absenting himself. >ere the absenting must be from the debtor3s place of business or usual aboard or from one of more particular creditors elsewhere. #t is an act of bankruptcy under this head if a debtor having made an appointment to meet a creditor at a particular place fails to attend to the appointment with intent to defeat it. 4efer to the case of 4e <orsley )*+-*) (.B. ,-+ here where a married woman left her place of business without paying her creditors or notifying her change of address' this was held to be an act of bankruptcy although she left at her husband3s re"uest to live with him elsewhere. c. The third is beginning to keep house @ a debtor keeps house if he refused to allow his creditors to see him or retires to some remote part of his house or business premises where they cannot gain access to him. #t must be shown that some creditor has been denied an interview in this way but the creditor must seek the debtor at a reasonable hour. /. L%)y!n* (3%cut!"n A*a!n+t 4""/+1 !ection ,)*))e) of the Bankruptcy Act. <here a judgment against a debtor remains unsatisfied' the judgment creditor will usually seek to enforce it by levying e:ecution on the debtor3s goods. This will constitute an act of bankruptcy available to any other creditor if the goods are sold by the Bailiff or retained by them for 1* days e:cluding the date of sei7ure. The petition founded on this act must be presented within , months thereof. The Bailiff is in possession for the purpose of this section where under a Awalking possession3 agreement he withdraws his officer upon the debtor3s acknowledging that the goods have been sei7ed and allows the debtor to continue normal trading in the goods provided that a limit is imposed on the value of the goods which can be dealt with in this way by the debtor. #f a ,rd party makes a claim to any of the goods sei7ed' the bailiff must take out an inter pleader summons to determine the ownership of the goods. The period occupied in dealing with these summons is not to be counted in the 1* days.
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0. D%c,arat!"n O- Ina#!,!ty T" Pay D%#t+' BA !ection , )*) )f) as read with Bankruptcy 4ules +B. >ere a formal declaration by the debtor that he is unable to pay his debts or a bankruptcy petition presented against himself the latter being the most common constitutes an act of bankruptcy upon delivery of the document to the proper official of the court. A declaration of inability to pay debt is re"uired to be in Corm 6o. 1 of the Bankruptcy 4ules while a debtor3s petition is re"uired to be in Corm 6o. , of the Bankruptcy 4ules. D. Bankruptcy N"t!c%0 !ection = as read with !ection ,)*) g of the BA. >ere if the debtor fails to comply with the provisions of a bankruptcy notice' within D days' he commits an act of bankruptcy. A bankruptcy notice is a notice issued by the court and served on the judgment debtor calling upon the debtor to pay the amount of the judgment debt or else satisfy the court that he has a counter;claim set;off or cross;demand which e"uals or e:ceeds the amount of the judgment debt and which the debtor could not set up in the action in which the judgment was obtained. A bankruptcy notice must be preceded by a re"uest of issue of the notice and this is in Corm 6o. = of the Bankruptcy 4ules. A bankruptcy notice must be in the prescribed form and must state the conse"uences of non; compliance. #t can only be issued at the instance of a creditor who has obtained a final judgment in a (enyan court or foreign court where there is reciprocity. The prescribed form of a bankruptcy notice is Corm 6o. / under the Bankruptcy 4ules. The period of D days for compliance applies where the notice is served in (enya. #f served abroad the court will fi: the time for payment in order to give leave to serve it abroad. The notice must re"uire payment to be made in e:act accordance with the terms of the judgment. Therefore if by agreement with a creditor payment is to be made by installments' a notice cannot issue on the failure to pay one installment for the whole of the unpaid balance unless it was provided but the whole balance should become due on failure to pay any installment. #f a portion of the judgment debt has been paid' there not being any agreement to take payment by installments' the bankruptcy notice must issue for the balance unpaid and not for the whole depth. But a bankruptcy notice will not be invalidated by reason only that the sums specified in the notice as the amount due e:ceeds the amount actually due unless the debtor within the time allowed for payment gives notice to the creditor that he disputes the validity of the notice on the ground of such misstatement. #f the debtor does not give such notice he is deemed to have complied with the bankruptcy notice if within the time allowed he takes such steps as would have constituted a compliance with the notice had the actual amount due been correctly specified therein. #t should be noted that two separate judgment debts cannot be included in one notice. A bankruptcy notice cannot be issued if e:ecution on the judgment has been stayed. The debtor after service of the notice may seek to have it set aside if he has a counter;claim' set;off or cross; demand which e"uals or e:ceeds the amount of the judgment debt and which he could not have set up in the action on which the judgment was obtained or for any other reasons. #f the debtor does not successfully challenge the notice and does not pay the debt or provide satisfactory security for it within the specified time he commits an act of bankruptcy which is available not only to the creditors issuing the notice but to any other creditor provided that he obtains an affidavit of non;compliance from the creditor issuing the notice.
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B. 4!)!n* N"t!c% T" Cr%/!t"r+ O- Su+p%n+!"n Or Int%nt!"n T" Su+p%n/ D%#t+ ' !ection ,)*) )h) BA. >ere a statement by a debtor that he has suspended or is about to suspend payment of his debts needs no particular formality but the notice must be given in such a manner as to show that his intention was to give information that he has suspended all those about to receive payment. That will constitute an act of bankruptcy for e:ample notice of !uspension has been inferred where a trader summoned a meeting of his creditors with a view to proposing a composition. #t has also been inferred where a debtor made a verbal statement to the managing clerk of the solicitors acting on behalf of his creditors that he was unable to pay his debts. A notice given $without prejudice& has been held to be admissible as proof of the acts of bankruptcy. BANKRUPTCY PROC((DIN4S By section / of the Act' if a debtor commits an act of bankruptcy' the court may on a bankruptcy petition being presented by either a creditor or a debtor himself make an order called a receiving order for the protection of the debtor3s estate. Bankruptcy proceedings can thus be initiated by a creditor or a debtor. <here proceedings are initiated by the debtor a petition is sufficient. >owever where proceedings are initiated by the creditor the procedure is different. As a creditor you will have to file issuance of a bankruptcy notice. This is done by producing to the registrar a copy of the judgment on which the order is founded. The person upon whom a declaration of bankruptcy is being sought must reside in (enya or be within the jurisdiction of the court. Eou must e:plicitly state that there is no stay on the judgment. The 6otice will re"uest for immediate payment of the debt unless the debtor can negotiate a settlement with the creditors. The 6otice will also state the conse"uences of failure to abide by the notice. 9nder rule *-1; #t is mandatory of the bankruptcy notice to be served within one month. The debtor can challenge the notice by a statutory form affidavit stating that the debt is settled or by obtaining stay. !ee also 4ule *-*. Fnce it is filed the court sets the matter for hearing. The court will look at the content of the notice' judgment and affidavit. #f the court is satisfied it will set aside the order. After serving the notice' a bankruptcy petition is filed8 Bankruptcy petitions are in statutory form. !ee sections 0 of the Bankruptcy Act i.e monetary threshold )it could have been amended by now). #t can only be founded )i.e the petition) on a li"uidated debt. Thirdly' the Act of bankruptcy should have been committed in the last three months. Courthly a petition can only be filed against a debtor domiciled in (enya. The debtor must have been doing business in (enya even if it is through an agent. #f the debtor has security he has to state it and enter give it up or given an estimate of its value. 4e"uirement Ff A Bankruptcy Petition
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!ection 0 gives the conditions under which a creditor can give a bankruptcy petition against a debtor. A creditor shall not be entitled to present a bankruptcy petition against the debtor unless8; i. The debt owed him by the debtor to the petitioning creditor or if two or more creditors join in the petition' the aggregate amount of debts owing to the several petitioning creditors amounts to (sh. *---?G. ii. The debt is a li"uidated sum payable either immediately or at some future time. iii. The act of bankruptcy on which the repetition is grounded has accrued within , months before the presentation of the petition. iv. The debtor is domiciled in (enya' or within a year before the date of the presentation of the petition has ordinarily resided or had dwelling house' or place of business' or has carried on business in (enya personally or by means of an agent or manager' or within the said period has been a member of a firm or partnership of person which has carried on business in (enya by means of a partner or agent or manager. v. 6o creditor is entitled to rely on a deed of arrangement as a basis for a bankruptcy petition where any law in force relating to deeds or arrangement prohibits him from doing so. Verification of Bankruptcy Petition This is done by an affidavit and it is sworn to by a creditor of someone on his behalf such a person must have full knowledge of the facts deposed to in the affidavit. The petition must ask for a receiving order to be made against a debtor. #t must show the address at which the debtor has been carrying on business. #t must show the amount of the debt. #t must indicate the act of bankruptcy on which the petition is founded' without which the petition is void. Fther re"uirements include o .lear description of address of debtor. o !econdly' it must be attested by an advocate' justice of the peace' receiver or registrar of the court. #f attested outside (enya' it might be done by a Hudge or notary public. o At the time of filing the petitioner must deposit security for costs. #t must be deposited with the official receiver. Cile also an affidavit with the petition which is signed by the creditor and one of its directors or partners. o Fnce the petition is filed it must be served on the debtor personally or by substituted service. A debtor can file a response to a petition through challenging it and obtaining stay. #f the petition is not being challenged the creditor can apply to court for the appointment of an official receiver' often a govt. agent as an interim receiver before making the final receiving order. <here a petition is filed by the debtor it is heard straight away and makes a receiving order. 9nder 4ule *B' the petition cannot be heard until after B days of service of the notice to each party. 2ven then if the petition is unchallenged a receiving order cannot be made immediately. A petition can be challenged by the debtor filing notice to show cause stating8 o The statement in the petition which he intends to dispute. o The grounds on which he will dispute the statement. !ee Corm *D.
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Fnce the petition is filed it can3t be withdrawn just like that. Fne must apply for leave to do so. #f the debtor doesn3t enter appearance' the case is heard e:;parte and a receiving order is made. #f the debtor enters appearance he is entitled to present witnesses on the ground of his opposition. Bankruptcy rules8 if you don3t appear the matter becomes res judicata and you can3t file on the same Act of Bankruptcy unless you obtain leave to do so. >earing Ff The Petition At the hearing of the petition' the petitioner must8 o Prove the debt o Prove that an act of bankruptcy has been committed. <hile the debtor' in defense' can aver that8 o >e has paid the debt o >e is capable of paying the debt o >e might as well stay proceedings if he can show that the decree has been stayed on the grounds that it is subject to appeal on application to set aside. 9pon hearing' the court may make a receiving order or dismiss the petition. The court may dismiss this petition if8 i. #t is not satisfied with the proof of any of re"uirements. ii. #t is satisfied by the debtor that he can pay his debts. iii. #t is satisfied that for sufficient course no order should be made. 4eceiving Frder #f petition was presented by debtor' a receiving order is made once the petitioning debtor files his statement of affairs with the official receiver. <here a petition is presented by a creditor' the courts will fi: the matter for hearing and make a receiving order if satisfied that an act of bankruptcy has been committed. A receiving order must state the date of the Act of Bankruptcy and contain a 6otice re"uiring the debtor to attend the official receiver forthwith on the service of the order at the place named on it. A receiving order on a debtor3s petition is in Corm 10 while an order vide a creditor3s petition is in form 1D. Fnce the order is made the registrar transmits it to the official receiver. #t is also the duty of the official receiver to advertise in the (enya Ia77ette and in the Daily Press J!ee Corm 1+ K ,-. The advert must state8 i) The name of the debtor ii) 4esidential Address iii) Description
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iv) Dates of making of the order v) .ourt in which the order was made vi) Date of Petition !ee !.10 of the Bankruptcy Act. Debtor challenging order; he can seek to rescind it on the basis that he has paid the debt in full or that it isn3t due at all. >e must issue a D day notice to the official receiver. Fnce the official receiver is served with the application to rescind he is re"uired to fill a report of the debtor3s conduct and affairs. The report is prima facie evidence of the statement made in it. >owever the court is entitled to hear further evidence adduced by any of the creditors. .onse"uences Ff The 4eceving Frder ; The official receiver becomes the receiver of the debtor3s property. At that time no creditor to whom the debtor is indebted in respect of any debt provable in bankruptcy can have a remedy against the person and property of the debtor as and against the debt. ; Fnce the order is made' no action can be commenced against the debtor3s person of his property without the court3s leave ; #n special cases the official receiver may allow the creditor to appoint a special manager over the debtors business in place of the official receiver. This normally happens where the nature of the estate is particularly comple:. ; The receiving order does not make a debtor bankrupt. #t doesn3t also deprive him of ownership of his property. #t only takes away from him control and possession of his property. ; After the receiving orders are made' any transaction entered into by the debtor is invalid regardless of whatever the other party to it has notice of the receiving order. Proceeding .onse"uent To A 4eceiving Frder !tatement of affairs The debtor is re"uired under !ection *0 to make out and submit to the official receiver a statement of his affairs. !uch a statement is verified by an affidavit showing8 i. Particulars of his assets' debts and liabilities. ii. 6ames' residences and occupations of his creditors. iii. The securities held by the creditors respectively. iv. !uch other information the official receiver may re"uire. v. #f the debtor himself presented the bankruptcy petition' then he must submit these statements within , days before the presentation of the petition. #f on the other hand' the petition was presented by the creditor)s)' then the statement must be submitted within *= days of the date on which the receiving order was made. #f he fails to do that' and there is no reasonable e:cuse for that failure' the debtor is deemed to have committed an offence and shall be guilty of contempt of court and punished accordingly. Curthermore' on the application of the receiver or any creditor' the court may adjudge the debtor bankrupt. Proof Ff Debt Fnce a receiving order is made creditors must take steps to prove their debts as soon as possible. This is done by delivering or sending by post to receiver or trustee an affidavit verifying the debt. The affidavit may be signed by the debtor or the authori7ed agent. #t must fulfill the following8
8

o o o o

#t must refer to the statement of account showing particulars of the debt #t should specify vouchers by which the statement can be substantiated. <here there are vouchers a creditor must be ready to produce them to the receiver or trustee The affidavit should state whether you are a secured creditor or not otherwise you stand the chance of loosing your security altogether.

Proof of Debt Corms are available for viewing to all creditors. A secured creditor can only proof for the balance on the secured debt. <here a creditor seeks to prove the whole amount of the debt he must surrender the security to the Ffficial 4eceiver or Trustee. #f a secured creditor has not surrendered the security' he shall' before ranking for dividends state in his proof the particulars' value and date such security was given. #t is only after he has done this that he can receive dividend' the balance due to him after assessing the value due on the security. #t is the duty of the official receiver to admit or reject debts after perusing the affidavit and e:amining every debt; if he finds no sufficient basis he may reject it. >owever the Ffficial 4eceiver3s decision may be appealed by creditors through making an application to court for a review. 5eeting of .reditors Fnce a receiving order is made there are several meetings held for the purpose of considering whether a proposal of a scheme and arrangement or composition is accepted or whether is e:pedient to declare the debtor bankrupt. These meetings are also held to determine how best to deal with the debtor3s property. The first meeting of creditors is summoned by the official receiver within 0- days of making of the receiving order. The 6otice calling for the meeting is re"uired to be accompanied by summons of debtor3s statement of affairs. The 6otice must indicate the time and place of the meeting. Fther meetings can be called if necessary. The official receiver is chairman of the *st meeting later meetings of creditors can be used to appoint the .hairman. #t is only creditors who have proved their debts by filing the proof of debt who can vote. A creditor can vote by pro:y; he must complete and return to the receiver the re"uisite forms. There are two types of pro:ies8 o !pecial Pro:y o Ieneral Pro:y Ieneral Pro:y allows a pro:y to do on behalf of creditors all things in the proceedings. !ee Corm /+. !pecial Pro:y; Fnly those specified in it can be done JCorm 0-. Luorum of meetings of creditors must be , unless their number is less than ,. !o for e:ample if there are + creditors there must be at least , at the meeting. #f meeting is late by half an hour without a "uorum it must be called off and it must be recalled within , days and in any case within 1* days. The minutes must be recorded. Public 2:amination Ff Debtor
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Fnce a receiving order is made the official receiver should apply to court for public e:amination of the debtor. This can only be done after the debtor has supported the statement of affairs. The purpose of this public e:amination is to see into the debtor3s affairs conduct' dealings and property. A creditor can only participate in such public e:amination if he has filed a proof of debt form. The creditors will normally "uestion the debtor on his affairs?dealings and cause of failure. The Ffficial 4eceiver or Trustee and court can "uestion the debtor as well. 2:amination takes the following format8 6otes of e:amination are taken in writing and the debtor is allowed to read and sign court proceedings. >e is e:amined under oath. A debtor who fails to attend Public 2:amination can be arrested. The official receiver serves the order of P.2 to debtor and also to notify creditors. The notice should be published in the Ia7ette and the Dailies. The court may dispense with Public 2:amination if the Debtor is incapacitated' mentally unfit or has a disability which cannot allow him to appear for e:amination. The debtor can otherwise choose to be e:amined in another place other than the usual one. The debtors advocate is allowed to be present but is not allowed to speak. .omposition or !cheme Ff Arrangement Fnce a receiving order has been made and the debtor intends to make a proposal of composition or scheme of arrangement he is re"uired to lodge with the official receiver a written proposal setting out the conditions of his proposal or scheme to be considered by his creditors. The composition or scheme of arrangement must be lodge within = days of the submission of the statement of affairs. The debtor must sign a composition?scheme and set out in it particulars of any security or sureties. <here there is a proposal the official receiver is re"uired to call a meeting of creditors before conclusion of public e:amination so that they can decide whether to accept a proposal or not. Cor a proposal for composition see Corm D= and that for a scheme see Corm D/. Fnce the official receiver the proposal he is re"uired to prepare a report on it and that report has a voting letter in the form of Corm D0. The official receiver then sends the report to creditors together with the debtors3 proposal. .reditors on the voting letter can signify in the voting letter their rejection and then return it to the official receiver at least a day before the meeting. Fne could also fail to sign the letter and then attend meeting and vote whether to accept or reject the proposal. Cor a proposal to pass it must gain a majority vote whose value must be M of all creditors who have proved. #f this happens its deemed as accepted by all creditors and becomes binding on all of them once it is approved by the court.

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Fnce proposal has been accepted the official receiver or debtor can apply to court to have it approved. 6otice of the hearing of the application must be given to all parties concerned. Fnce application is made the official receiver should file his report in court about = days before the hearing. At the hearing the creditor may still oppose the proposal if new facts emerged after the court3s approval. The courts decision on application for approval should be ga7etted. .onse"uence Ff Approval Ff !cheme By .ourt The official receiver is e:pected' after paying all costs to put the debtor back in possession of his property. The debtor may opt to appoint a trustee or agent to take possession of his property on his behalf. The concomitant conse"uence is that the receiving order is discharged. Any creditor can oppose any approval even if he had voted in favor of it at the meeting of creditors. #n deciding whether or not to approve the proposal the court will consider all the facts. A composition or scheme operates as a contract between debtors and creditors and any party may apply to court to enforce it. #f a debtor defaults on the proposal he risks being adjudged bankrupt and the scheme arrangement annulled. <here the proposal is annulled the debtor3s property will again rest with the official receiver. The court may annul the scheme under the following cases8 i. <here a default is made by the debtor in the payment of any installment due in pursuance of the composition or scheme. ii. #f on satisfactory evidence' it appears to the court that the scheme cant proceed because of a legal difficulty or for any sufficient cause' without injustice or undue delay to the creditor or debtor. iii. #f the courts approval was fraudulently obtained. A debtor is declared by the court to be bankrupt at the time it makes the order of annulment of the scheme. This doesnt however nullify any sale or disposition' or payment made or duly done under the composition or scheme. ADH9D#.AT#F6 FC BA6(49PT.E A debtor can only be adjudged bankrupt after receiving order is made and the adjudication of bankruptcy will be made in the following cases. a) <here debtor applies to be adjudged bankrupt. This can be done at the time of making the receiving order or anytime thereafter. The application need not be formal )there3s no legal re"uirement of notice)' the application can even be made orally in court. b) !econdly' one will be adjudged bankrupt when he doesn3t attend the 1nd meeting and subse"uent meeting of creditors. c) <here the debtor absconds he will be adjudged bankrupt. d) <here the debtor fails to make any proposal to his creditors e) <here the creditors refuses to accept a composition of scheme at their meeting.
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f) <here the public e:amination of the debtor is adjudged sine die )indefinitely). >ere the court may adjudge the debtor bankrupt without notifying him as the debtor fails to cooperate by disclosing his affairs by not attending public e:amination or even by not complying with any order of the court in relation to his account' dealings and property. g) <here creditors resolve at their meeting to have the debtor adjudged bankrupt or where they fail to pass any resolution. h) #f a composition of scheme isn3t approved within *= days of the conclusion of the public e:amination. i) #f the debtor with the concurrence of the official receiver consents in writing to be adjudged bankrupt. The order adjudging a person bankrupt should state the period after which the debtor may apply for his discharge. 2ffect of adjudication order ; 9pon adjudication the property of the debtor becomes divisible among creditors and is vested upon the trustee in bankruptcy. ; The order of adjudication is under Corm +0. The 6otice for adjudication of bankruptcy is published in the (enya Ia7ette by the official receiver. Process The trustee in bankruptcy is appointed by creditors by an ordinary resolution or by a committee of inspection. #f the person appointed trustee is a person other than an official receiver he is supposed to give security to court before appointment. >is appointment is official upon receiving a certificate of appointment from a court The committee of inspection is appointed by creditors and consists of not more than five people and not less than three who must be creditors of their agent. #ts an agency of the creditor to help deal with day to day administration of the debtor3s estate. #t meets at least once a month. 2ven after adjudication they may accept a scheme of arrangement if the decision is approved by court the bankruptcy is annulled and the debtor3s property will revert to him from the trustee. A debtor who fails to match up with the scheme or composition will be adjudged bankrupt. D#!.>A4I2 At the e:piration of the time prescribed by the court in the adjudication order the bankrupt is e:pected to apply to court for discharge. The court will fi: a date but the date should be after the conclusion of the Public 2:amination. #n order to apply for discharge the debtor produces to the registrar a certificate from the official receiver stating the number of creditors that the official receiver has notice' that is' o creditors who have proved' o those not proved but who the official receiver has notice and o those who have had their claim rejected by the official receiver and have appealed.

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Fnce the day of the hearing of the discharge is given' the registrar is re"uired to notify the official receiver and trustee. The 6otice must be given at least 1Bn days before the date of the hearing. The registrar is re"uired to advertise the hearing *= days in advance. #t is the responsibility of the official receiver to notify creditors at least *= days in advance. The Ffficial receiver also files his report of the debtors conduct D days before the hearing. #f a creditor wishes to challenge the discharge he must file a notice of objection which sets out the grounds upon which he challenges. #t must be served 1 days before the hearing. #n dealing with an application for discharge' courts may make the orders of discharge but impose certain conditions on the debtor e.g. #n case where there3s a balance of the debts provable in bankruptcy at the time of the discharge the court may grant a discharge if the debtor gives consent for judgment to be entered against him by the official receiver for the balance. !ee form *-B. The courts may also grant a conditional discharge re"uiring the debtor to surrender a portion of future earnings or after ac"uired property. 2.g. if there3s a balance after discharge e.g. , million the court can grant him discharge if he agrees to curve off future earnings to the official receiver. !ee Corm *-D. An order for discharge must be ga7etted' however this can only be done after the appealing time has elapsed. D#!T4#B9T#F6 FC A D2BTF43! P4FP24TE Fnce a debtor is adjudged bankrupt his property vests in the trustee in bankruptcy to be divided among creditors. .ertain debts rank in priority to the general ones. #n summary the following debts must be paid in priority Ta:es due to the government to the government and any rates. These will relate to those that have accrued within one year before the receiving order is made. Any rents due to the government for the last five years before the receiving order is made <ages or salaries of the bankrupt3s employees to be claimed for a ma:imum of = months before making of the receiving order. Any monies due to the bankrupt3s workmen. Amounts re"uired to be paid by the bankrupt to the 6!!C *1 months before making of the receiving order for the bankrupt3s employees These debts rank e"ually and must be paid out in full unless the bankrupt3s property is insufficient to meet them. After payment of the preferential claims the balance of the debtor3s property will be used to pay the other debts provable in bankruptcy. The debts are to be paid in pari passu )e"ually). #f there is any surplus it is used to pay any interest from the date of the receiving order. #f there is any more balance it is paid to the debtor.

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Fnly that property belonging to the debtor is divisible among creditors. Any property held by the debtor on trust cannot be distributed among creditors. The law also e:empts debtors3 tools of trade and unnecessary apparel for himself and his immediate family members. All other property belonging to the debtor or rested in him as the commencement of bankruptcy or ac"uired and devolved in him before discharge will be subject to distribution among his creditors. The trustee is e:pected' after retaining such sums necessary to cover the costs of administration to distribute dividends among creditors who have proved their debts. The bankrupt receives surplus after payment in full of creditors. Before declaring dividends' a trustee gives 1 months notice of his intention to do so to creditors mentioned in the statement of affairs that haven3t proved their debts. The notice must specify the latest date by which all debts must be proved. All debts admitted by the official receiver must be provided for. 4ejected debts are subject to8 o <hen a creditor has appealed against the official receiver3s decision to reject is proof that creditor3s debt must be provided for until the appeal is concluded. #f the appeal succeeds the creditor will be paid dividend due. #f he fails no dividend will be due. o #f a creditor has his debts rejected and he doesn3t appeal his debt won3t be provided for in the process of declaring dividends. o #f a creditor has his debts rejected and he doesn3t appeal his debts won3t be provided for in the process of declaring dividends. BA6(49PT.E FCC#.24! Ffficial 4eceiver Trustee in Bankruptcy !pecial 5anager Ffficial receiver The official receiver is appointed by the Attorney Ieneral )>e3s actually a !tate .ounsel) and is assisted by a deputy official receiver. The deputies have e"ual authority as that vested in the official receiver. Duties #nclude8 #nvestigating debtor3s conduct and reporting to the court. 2:tends to establish whether the debtor has committed an offence under the bankruptcy Act which will render the court to dis"ualify a discharge. Public e:amination of debtor Assist in prosecution of fraudulent debtors Pending the appointment of trustee to act as interim receiver and where a special manager isn3t appointed to act as one.
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To authori7e special manager to make advances?raise money for the purpose of the estate in any case where in the interest of the creditors it appears necessary to do so. To summon and preside over the *st meeting of creditors. To issue forms of pro:y for the use at the meeting of creditors To report to creditors of the debtor proposal with respect of li"uidating his affairs To advertise the receiving order' the debtors of the *st meeting of creditors and the public e:amination and other matters. To act as trustee during vacancy in the trustee3s office. To admit proofs of debt. To furnish the debtor with instructions for preparation of statement of affairs.

Trustee There may be more than one. o >old the property of the debtor o To make contracts on behalf of he debtor o To sue and be sued on the debtor3s behalf once adjudication is done u can3t sue a debtor in his own name. o Admission of proof of debts. o Declaring dividends o Distribute debtor3s property among his creditors. !pecial 5anager To manage the estate of the debtor during administration of bankruptcy and where he wants to take important action he must take authority from the official receiver.

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