Christmas is traditionally a season of merriment and relaxation where we normally get to let go of our concerns and just enjoy ourselves. However, this year many people are so focused on their financial challenges that they are finding it difficult to have fun. Some are extremely anxious about expanding debt positions and impending job losses, and wonder how they are going to turn around their finances. In the United States, it is fairly common for people who have been overwhelmed by debt to file for bankruptcy. According to Businessdictionary.com, bankruptcy is the legal procedure for liquidating a company, or property owned by an individual, which cannot pay its debts out of current assets. In Jamaica, only individuals file for bankruptcy as companies are placed in liquidation or receivership.
Is declaring bankruptcy an option for average Jamaicans who are mired in debt, and have no means to pay it back? I asked the Office of the Trustee in Bankruptcy to enlighten us about the process.
YM: What is the role of the Office of the Trustee in Bankruptcy (OTB)?
OTB: The OTB is a department under the Ministry of Justice and operates under the provisions of the Bankruptcy Act as well as the Companies Act. The OTB exists primarily to liquidate assets of bankrupts and companies in liquidation, and to as far as possible, make good on debts owed to their creditors. This is done by:
- Assessing whether the individuals and companies are financially viable;
- Assisting in the restoration of their financial viability where possible;
- Providing them with a legal shelter, where necessary, and protecting creditors from unscrupulous debtors.
YM: Who can apply to the OTB for financial assistance?
OTB: Any individual who is unable to pay his debts may make an application to the Trustee. The Trustee then presents a petition to the court on his behalf for an Absolute Order in Bankruptcy to be made against him. Once the order is made then the Trustee in Bankruptcy becomes responsible for administering the affairs of this individual, and assisting him to discharge his debts.
YM: Can a creditor force a debtor into bankruptcy?
OTB: A creditor to whom a debt is owed may also present a Bankruptcy Petition against a debtor to the court, stating the grounds on which the petition is made. The creditor should have obtained final judgment from the court in respect of this debt. Once the grounds are satisfied then a provisional order is made against the debtor and the debtor is given an opportunity to come to court to show cause as to why the order should be revoked.
If the debtor is unable to show cause then an absolute order is made against him and the Trustee in Bankruptcy becomes responsible for administering his affairs until his debts are fully satisfied and he is discharged from bankruptcy.
YM: What are the implications for bankrupt individuals and companies in liquidation?
OTB: The law places restrictions on legal proceedings against a debtor or company in liquidation after an order has been made against them. Such action requires the leave of the court. The law also limits the circumstances in which interest on debts owed by a bankrupt or company in liquidation may be claimed by their creditors.
Once a bankruptcy order is made, all the individual's assets are now vested in the Trustee in Bankruptcy. If an individual who is still an undischarged bankrupt cannot be a director in a company, and should not access any credit from an institution without the Trustee's permission.
YM: What recourse do creditors have if an individual or company that owes them is declared bankrupt?
OTB: Once a bankruptcy order is made against an individual, or a company is placed in liquidation, the Trustee in Bankruptcy then advertises for creditors to file and prove their claims with him. Unless the creditor is a secured creditor, then all creditors rank equally in proportion to their debts, and in these circumstances no individual creditor can be paid in priority to any other creditor. Once claims are received and proved, the Trustee in Bankruptcy will satisfy the claims.