Being “bankrupt” means that you cannot pay your debts or meet your obligations. In The Bahamas, bankruptcy laws apply only to individual debtors (people, not businesses); companies that cannot pay their debts must use the insolvency laws to wind up. As to individual bankruptcy, a few basic principles apply.
First, during the bankruptcy process the court issues orders that assist in administering the debtor's assets and liabilities and in distributing the assets among creditors (people to whom the debtor owes money). Debtors must reside in The Bahamas, conduct business here, or hold assets here to come within the Bahamian bankruptcy laws. The applicable legislation is The Bahamas' Bankruptcy Act 1870 and the Bankruptcy Rules 1958. Under these laws, a creditor can petition the court for a declaration of bankruptcy against an individual debtor.
To actually qualify as “bankrupt” under the Bankruptcy Act, an individual must have committed an act of bankruptcy. Examples include owing a creditor a debt of $200 or more, being classified as a “judgment debtor” or someone owing a party to a lawsuit payment of a judgment, making fraudulent transfers to avoid debts, fleeing the country to escape creditors, and more. One or more acts of bankruptcy must have been committed within six months prior to beginning bankruptcy proceedings.
Usually, creditors file a Debtor's Summons to begin the proceedings. The summons requests that the debtor pay the debt, arrange an installment plan or make similar arrangement for payment of the debt, or secure the debt to property. If the debtor does not respond to the creditor's satisfaction, the creditor may file a bankruptcy petition with the Supreme Court. If, however, there is a problem with the summons, the debtor may apply to the court to set aside the summons. For example, an application to set aside will move forward if there is a dispute about the money owed or if the summons was issued in error.
When a bankruptcy petition is filed, the court will issue orders regarding administration of the debtor's assets and liabilities. The court will call a meeting of all the creditors, who will appoint a trustee, receiver, or registrar who will protect assets and administer creditor claims. The trustee will investigate the debtor's liabilities and make reports to the court about his status. The court then will ascertain if there are any preferred or excluded debts under the law. Eventually, the remaining assets will be distributed among the creditors.
The effects of bankruptcy on debtors cannot be underemphasized. Debtors completely lose control of their assets during the bankruptcy process. They may have difficulty taking action in court aside from the bankruptcy, may be barred from practicing if they are professionals, and may not be a company director or trustee while the bankruptcy is pending. Further, bankruptcy can seriously affect individuals' credit and future financial endeavors such as seeking loans.
To find out more about individual bankruptcy, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.