A person may be made a Bankrupt in two ways.
A Creditor – person to whom a debt is owed
A creditor who has already obtained a final Judgment and served his debtor with a Bankruptcy Notice but has not recovered may file a Petition for the debtor to be declared a bankrupt. In this case, a Provisional Order is issued and other steps taken before the individual is declared an absolute bankrupt.
A Debtor – person who owes a debt to another
A debtor who is unable to satisfy debts for which he is being pursued may file a petition to be declared a bankrupt. In this case, an Absolute Order may be issued by the court immediately.
Bankrupts are relieved of harassment by creditors as all claims for payments must be made through the OTB and creditors are required to liaise directly with the OTB thereafter. No action (court proceedings) may be commenced against the bankrupt without permission of the Court. The bankrupt has the opportunity to formulate an arrangement by which debts may be satisfied by periodic payments or some other means as agreed with his creditors. Bankruptcy prevents interest from accruing on debts after the date of the Absolute Order and any Interest due on debts is capped at 6% (conditions apply). Creditors whose claims are admitted are assured of payment once funds are available for distribution from the estate of the Bankrupt.
Step 1: Visit the OTB for an interview by an Estate and Liquidation Administrator to be advised of the implications of making an Absolute Order and the requirements under the Bankruptcy Act. A debtor must provide proof (e.g. Judgment, Demand Letter) that he/she is being pressured for payment by one or more creditors.
Step 2: If approval is granted by the Trustee in Bankruptcy (based on report of interview), the debtor is so advised and invited to attend a second interview to complete the process i.e. review, complete and execute a pre-prepared Petition and Statement of Affairs in duplicate. A fee of $20,000.00 for initial administrative expenses must be paid and 2 copies of the Statement of Affairs purchased (cost of $750 each) and completed.
Step 3: The Petition and Statement of Affairs are filed at Supreme Court and the debtor is notified and served by the OTB with the Absolute Order once it is issued. The Absolute Order contains the date for the Commencement of Public Examination to determine the means of the debtor and a reasonable amount for him/her to pay per month towards the satisfaction of his/her debts.
Valid Government-issued picture ID
T.R.N. (if 1 above is not your Driver’s License)
Employment letter (may be addressed ‘To Whom it may concern’) and 3 most recent pay invoices
2 most recent bills from 2 utility companies (as proof of residence)
Up-to-date statements from creditors showing outstanding balances
Names and contact information (address, telephone number, email) for 2 references (JP, Attorney, School Principal, Minister of Religion)
Copy Titles for any major assets (house, land, motor vehicle, etc)
Copies certificates, policies, etc (Insurance, savings, shares, etc.)
Receipt for payment of Initial Fee of $20,000.00
Publication of Order – The Absolute Order is published in the Gazette to notify the public that the Debtor has been declared a bankrupt.
Identification of Assets and Creditors – Letters are sent out to the creditors listed in the Debtor’s Statement of Affairs as well as to all major financial institutions (particularly banks, credit unions and insurance companies) and relevant government offices and searches done at the National Land Agency (Titles Office), Inland Revenue Department (Tax Office) and Jamaica Stock Exchange for them to identify any assets owned by the Debtor, payments due to the debtor or any debts payable by the Debtor.
Meeting of Creditors – A meeting is held at the OTB and moderated by the Trustee which the debtor and his creditors discuss the state of his affairs and try to agree an arrangement for the payment of his debts.
Filing of Trustee’s Report – The Trustee files a report of the meeting to advise the court of any arrangement reached between the debtor and his creditors or that no arrangement was reached and the
Public Examination – Bankruptcy court is held on the first Wednesday of every month of the court term for debtors to be examined about their lifestyle and circumstances, particularly their income and expenses, so as to determine what amount a Debtor can reasonably afford to pay towards his debts.
Payment Orders – Following the Public Examination, the court will make an Order for the Debtor to pay a specific amount each month towards the satisfaction of his debts. This amount may be varied (increased or decreased) based on changes in the debtor’s circumstances.
Sale of Assets – Pursuant to Section 42 of the Bankruptcy Act, ALL the assets of a bankrupt vest in the Trustee immediately upon the grant of a Provisional or Absolute Order. As administrator of the debtor’s estate, the Trustee has right and authority to dispose of all or any part of the debtor’s property to generate income for the estate.
Payment of Dividends – Income generated from monthly payments and/or the disposal of assets is invested in interest bearing accounts at stable financial institutions and allowed to accumulate until a reasonable payment can be made to creditors. Creditors are paid in order of priority (based on the statute) and, for the most part, in proportion depending on the funds of the estate. Payments are usually made as several dividends representing varying percentages of the overall debt until the debt it satisfied in full.
Discharge of Bankrupt – Once all the liabilities of the debtor’s estate have been satisfied in full as verified by a Report from the Trustee, the debtor may apply to the Court to be discharged.
Any person against whom a Provisional or Absolute Order has been made has a duty to:
In the course of Bankruptcy proceedings the Court may, among other things, do any of the following:
Some of the rights, duties and powers of the Trustee in administering an estate are:
Debts are paid in part or in full when sufficient funds have been accumulated.
Creditors are paid in order of priority and in proportion to their debts depending on the funds available. Priority is given to debts owed to the Government or statutory bodies and payments due to employees (e.g. outstanding salary and redundancy payments). Once these have been paid in full, all other creditors are paid in proportion and on equal footing. A 6% Commission is calculated on all payments.
N.B. Debts owed to creditors take priority over dividends, profits, etc. due to members.
A person who has been declared a bankrupt should NOT:
The OTB is a Department under the Ministry of Justice originally established to administer bankrupt estates island-wide. However, under the Companies Act (‘the Act’), the Trustee in Bankruptcy (‘Trustee’) is deemed the Provisional Liquidator (PL) of any company for which the court has not appointed another person on the making of a Winding Up Order. In such cases, the Trustee as PL administers the affairs of the company and seeks to settle its outstanding liabilities.
The Act prescribes three (s) modes of winding up a company: Winding Up by the Court, Voluntarily Winding Up and Winding Up with the Court’s supervision
An application for winding up may be filed by:
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Step 1: Visit an Attorney-at-law to be advised on the requirements for obtaining a Winding Up Order under the Companies Act and the implications of one being made.
Step 2: Have an Attorney prepare and file the Petition for Winding Up and Affidavit Verifying Petition. The Petition must set out the basis for the application and the Affidavit should exhibit such documents as are necessary to prove the circumstances giving rise to the application.
Step 3: Once a date has been set for the hearing of the application, serve the Petition and Affidavit on the Company or its Directors ahead of the hearing. On the given date, attend at the hearing. If the Order is granted, prepare and file the Order and await same to be perfected.
Service – The Petitioning Creditor (PC) must serve the Trustee as Provisional Liquidator (PL) with an original copy of the Petition and Affidavit and 2 original copies of the Winding Up Order.
Payment of Administrative Expenses – The PC must pay to the PL a sum required to cover the costs of initial administrative expenses including postage, publications, filing, and other costs. (This sum is currently set at $50,000.00.)
Publication of Notices – The PL publishes a Notice of Appointment and an Advertisement for Creditors in the Gazette and, subject to the availability of funds, in a major newspaper of national circulation.
Companies Search – The PL forwards one of the original Orders to the Registrar of Companies and conducts a search at the Companies Office to obtain copies of the documents and records relating to the Company.
Issuance of Notices to Directors – The PL issues Notices directly to the Directors of the Company requiring them to submit a Statement of Affairs and turn over the documents, records and books of the Company. (The PC may also be asked to provide any additional information or documentation he may have in relation to the Company.)
Asset Search – Letters are sent to various financial institutions (including banks, investment houses and insurance companies) as well as government and other offices requesting that they identify any assets being held for the Company and/or provide details of any outstanding liabilities owed by the Company.
Vesting – Under the Act, the PL is permitted to make an application to the Court for the property of the company to be vested in him. (Note, however, that the PL is authorized to deal with the assets upon the grant of the Winding Up Order.)
Filing of Statement – The Statement of Affairs, if provided, is filed at Court. Alternatively, if none is available, the PL makes an application for this requirement to be dispensed with.
Tracing and Recovery of Assets – Once the assets of the Company have been identified, the PL makes an inventory/listing of all the assets and obtains any necessary valuations.
Submission and admission of claims – Creditors with claims against the company must submit a Proof of Debt Form detailing their claim and attaching any documents in proof of same. The PL assesses each claim and makes a determination of whether and to what extent it is to be admitted and notifies the creditor of his decision.
Filing of Preliminary Report – Once the PL has taken the necessary steps to ascertain the assets and liabilities of the Company, he prepares a detailed report to the Court outlining the Company’s true financial position.
Meeting of Creditors and Meeting of Contributories – Notices are published of the date on which these meetings are to be convened by the PL. Creditors whose claims have been admitted are to attend the Meeting of Creditors. Persons holding shares which have not been paid up have a duty to contribute to the payment of the liabilities of the company and are to attend the Meeting of Contributories. The purpose of these meetings is for the creditors and contributories to determine by Resolution who, if not the Trustee, is to be appointed Liquidator of the Company; whether a Committee of Inspection should be appointed; and who should form the Committee. A Report of the Resolutions passed is filed in Court and application made for Orders in keeping with them.
Liquidation of Assets – The Liquidator, upon appointment, proceeds to dispose of the assets of the Company. Assets may be sold by auction or private treaty at the best obtainable price. The proceeds of sale are placed in an interest-bearing account or invested in safe instruments.
Dividend Payment – When sufficient funds have accumulated, Notices of Intention to Dividend are published in the Gazette. Several dividend payments are usually made, each representing a percentage of the overall debt. Payments are made periodically until the debt it satisfied in full.
Submissions of Accounts – Every six months, an account is sent to the Registrar of Companies of all the receipts and payments in relation to the Company.
Dissolution of the company – Once all the liabilities of the Company have been satisfied in full as verified by a Report from the Liquidator, the Liquidator applies to the Court for an Order that the Company be dissolved. The names of companies which have been dissolved are removed from the Register of Companies and can no longer be used.
During the winding up of a company, the Officers of the Company are required to:
In the course of Winding Up proceedings the Court may, among other things, do any of the following:
Some of the rights and duties of the (Provisional) Liquidator in winding up a company are:
Once Winding Up proceedings have commenced, an Officer of the Company should NOT: