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Press Release: Order for bankrupt debtor who continued to borrow
Press Release: Order for bankrupt debtor who continued to borrow6 August 2012
Scotland’s insolvency service, Accountant in Bankruptcy (AiB), has secured a four-year Bankruptcy Restrictions Order (BRO) on a hotel owner from Gretna, for not disclosing his bankrupt status when applying for further credit, despite being aware of this condition of his bankruptcy.
John Brian Davidson was the owner of the Garden House Hotel in Gretna at the time he was declared bankrupt on 19 March 2011 following a petition from HMRC for unpaid taxes amounting to over £200,000. Sheriff Jamieson at Dumfries Sheriff Court heard that Mr Davidson had been informed, as a condition of his bankruptcy, that he was not permitted to incur credit in excess of £500, without declaring to creditors that he was undischarged from his bankruptcy at that time.
Sheriff Jamieson heard, through a court application from AiB that, despite this restriction, Mr Davidson had continued to trade by means of obtaining credit from local suppliers and businesses for amounts in excess of £7,000. None of these creditors have received payment from Mr Davidson for the goods or service received. The Sheriff decided that the misconduct was severe enough to delay his discharge from bankruptcy for a further two years as well as enforcing a BRO, placing serious financial limitations on him until 2016.
Rosemary Winter- Scott, Chief Executive of Accountant in Bankruptcy which submitted the case evidence to court, said:
“This case is a prime example of the serious consequences that can happen when debtors do not adhere to the terms of their bankruptcy. By not declaring his bankrupt status to potential creditors, against both the advice of his trustee, and the conditions of his bankruptcy, this debtor’s misconduct has resulted in a no-win situation for all involved. His creditors - individuals and small business – are out of pocket to the sum of over £7,000 while he himself will face severe financial restrictions lasting for over four years.
“Bankruptcy Restrictions Orders and Undertakings are central to protecting not only the bankruptcy process, but the people and organisations owed money who suffer financially from irresponsible or unscrupulous behaviour.”
Mr Davidson did not contest the BRO application or the Deferral of Discharge application when they were presented in Court.
- Debtor details: John Brian Davidson, from Sarkfoot, Gretna. Mr Davidson was awarded bankruptcy on 19 March 2011. The details of the case are recorded in the Register of Insolvencies (http://roi.aib.gov.uk/roi/) which can be accessed by the public, free of charge.
- The Bankruptcy Restrictions Order case was heard at Dumfries Sheriff Court on 5 July 2012 by Sheriff Jamieson.
- The BRO was imposed for misconduct, as defined under Section 56B(2)(m) of the Bankruptcy (Scotland) Act 1985, as amended: Failure to co-operate with the trustee
- BROs were introduced by in 2008 to offer protection to creditors and businesses and impose certain restrictions on debtors who act inappropriately either before or during bankruptcy. There are various types of behaviour which can lead to a BRO, including gambling, extravagance, speculation and failing to co-operate with the trustee. The restrictions can apply for between two and 15 years after bankruptcy.
- The role of a trustee is to administer an individual’s bankruptcy case by realising a debtor’s assets (ingather funds) to ensure the best return for creditors.
- AiB is an Executive Agency of the Scottish Government with responsibility for administering the process of personal bankruptcy, administering the Debt Arrangement Scheme and recording corporate insolvencies in Scotland. AiB’s mission is to ‘ensure access to fair and just processes of debt relief and debt management for the people of Scotland, which takes account of the rights and interests of those involved.’
- AiB is responsible for BRO investigations. Where potential misbehaviour is identified, AiB is required to apply to a sheriff for the imposition of a BRO. The sheriff’s decision is made after consideration of the evidence at a court hearing.