Applying for Bankruptcy - hklegal
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Applying for bankruptcy in Hong Kong

To most people in Hong Kong, “bankruptcy” is considered as an irresponsible act which can bring about many negative effects.

In fact, filing for bankruptcy can help protect the applicant’s family and personal life. Filing a bankruptcy can prevent creditors from taking action to collect their debts, repossessing property, disturbing you and your family.

Consequences of bankruptcy

 

Hong Kong faces gloomy and uncertain economic future which may result in a wave of personal and small-business bankruptcies again. Many people have filed for bankruptcy as pandemic stifles incomes and aid runs out.what are the consequences of bankruptcy? When will the bankruptcy order be discharged?

 

A successful bankruptcy petition will affect the debtor’s daily life to a certain extent. Successful bankruptcy petitioners should not use or buy expensive goods such as houses or vehicles and try to apply for loans to borrow money. The bankrupt is allowed to travel overseas, but none of the travel expenses can be paid out of the bankrupt’s assets and income. As for taking taxis in case of daily bankruptcy, bankrupts should avoid taking taxis if they have a good reason.

 

In addition, the debtor may not be able to practise in certain professions such as lawyer, estate agent, securities dealer or act as a director of a limited company. If you are working in the banking sector, you are required to inform your employer under the Banking Ordinance. It is also important to note that when a bankruptcy petition is discharged, all other bankruptcy references remain on the debtor’s credit report.

Is there any alternative to bankruptcy?

Debt Restructuring

Under the Bankruptcy Ordinance, a debtor can apply for an Individual Voluntary Arrangement (IVA) as an alternative to bankruptcy. The Kingdom Consultancy’s team can help communicate with the court and the creditors on the debtor’s behalf and create a repayment proposal to them.

If approved, it legally binds all creditors. By applying for an IVA, a debtor can avoid the legal restrictions of bankruptcy, and may also be able to retain his/her job or profession. 

Debt relief plan

The debt relief plan (DRP) is a major debt restructuring solution. It is a simple version of individual voluntary arrangements (IVA) because the applicant does not need to follow legal procedures. Debt restructuring agency directly with the consent of debtors develops the new repayment mechanism with the creditor(s) that consist of repayment amount, interest rate, number of installments and method of payments.

In some cases, where there are numbers of creditors but the amount outstanding is relatively small. Then DRP to restructure debt is a more preferable option for debtors, especially for the debtors working in banking, insurance, finance and disciplined services, not the IVA. What happens if the debt relief plan fails?

As you are negotiating with individual creditors, there are three possible scenarios:

1) all creditors accept your repayment offer;

2) only some creditors accept it;

3) and all creditors reject your offer. If the third scenario is the case, then your debt relief plan has failed. In this case, you can try to switch to IVA, but the odds of success are generally low.

Company liquidation

Liquidation can be initiated by the company or by a creditor who files a petition for liquidation to liquidate the company and wind up the business, in other words, the assets are sold to pay off the debts with the value of the company. A periodic payment order in most cases will not transfer the debt to an individual.

For an unlimited company or a partnership company, since the liability is “unlimited”, the ultimate solution for their debt problems is to file for bankruptcy.

Bankruptcy Proceedings

Since it is the first time for bankruptcy petitioners to come into contact with the complicated bankruptcy procedures of the court and they do not know much about the bankruptcy paperwork, many bankruptcy petitioners would make mistakes in filling out bankruptcy forms, which would lead to delay in processing the application and troubles and the bankruptcy officer would doubt the credibility of the petitioners. As a result, the debt collectors continued to harass the debtor, affecting their friends and jobs, and thus their families suffered from daily disturbance from the creditors.

First Step

Step 1: Applicants must download and complete Form 3 of the Bankruptcy (Forms) Rules “Debtor Bankruptcy Petition” and Form 28C “Statement of Statement of Assets and Liabilities (Debtors) of the Bankruptcy (Forms) Rules” from the Official Receiver’s Office website Petition)”, and then bring the documents to the Official Receiver’s Office Reception Office and pay HK$8,000 to cover the various fees and expenses that will be incurred.

Second Step

Step 2: The applicant must witness and swear the petition in front of a lawyer, the Registrar of the High Court or an authorized official of the Official Receiver’s Office. It should be noted that this service is on a first-come, first-served basis. If the quota for that time slot is full, applicants will be awarded the unallocated quota for the next time slot.

Third Step

Step 3: After completing the oath, you can complete the following procedures on the same day, including: the applicant brings the relevant documents and the deposit receipt issued by the Official Receiver’s Office, and then goes to the Payment Office of the Accounting Department of the High Court to pay the court fees HK$1,045 Obtain the bankruptcy case number at the counter of the Registry of the High Court, obtain the date and time of the hearing from the Senior Judicial Clerk of the Registry of the High Court, and formally submit the petition and statement of assets and liabilities.

The Fourth Step

Step 4: After completing the above procedures, you must immediately submit a stamped copy of the bankruptcy petition and a copy of the statement of assets and liabilities to the Official Receiver, and obtain a preliminary questionnaire and monthly income and expense assessment form.

Bankruptcy in Hong Kong

Managed Bankruptcy Service Fees

Pre-bankruptcy (i.e. before the declaration of bankruptcy)

  • Interviewing the Trustee: Teaching you the most frequently asked questions about the survey and how to deal with them. This is an important part of the process and should be taken seriously.
  • Annual Reports: Annual reports are filled out by proxy once a year, four times a year. Failure to submit the report will result in prosecution and fines.
  • Joint Properties: We will assist you with joint properties that are in receivership, especially as it relates to your family’s property rights. 
  • Notice of Departure: You are free to leave Hong Kong and we will declare your departure to the Trustee in Bankruptcy on your behalf.
  • Notice of Employment: When you have found a new job, we will write to the Trustee of Bankruptcy to update you on the details of your employment and the use of your income.
  • Meeting of Creditors: Some debtors are required to attend a meeting of creditors, after which the case will be referred to the new trustee. We will explain how the meeting will affect you and how to handle your case. New trustees often give bankrupts a lot of conflict. 

Pre-bankruptcy (i.e. before the declaration of bankruptcy)

  • Case Analysis: We will analyze all the issues brought about by bankruptcy, such as property, pension, insurance policy, bank account, family, job, etc.. We will also analyze all of your current debts and the current status of your collection efforts, and provide you with strategic solutions.
  • Paper Filing: Filings and summon can be done on the same day as the bankruptcy hearing.
  • Collection issues: Immediate notice to creditors of bankruptcy petitions to stop the collection nuisance.
  • Account Freezing: Petition to unfreeze a bank account and retrieve frozen wages.
  • Preliminary Inquiry Form: There may be difficult questions and if you answer them recklessly, you may be subject to prosecution. We will assist you in answering all questions in the interrogation form.
  • Income and Expense Declaration: If you know how to declare your expenses, you can keep all or most of your income for your living. We will help you get the most out of your expenses to meet your needs.

Frequently Asked Questions(FAQs)

Frequently Asked Questions on Bankruptcy

There is a chance that a bankruptcy petitioner may be unable to repay his or her debts due to unemployment, income problems, household expenses, or cash flow problems of the company. The High Court of Hong Kong will issue a bankruptcy petition or an interim bankruptcy order to effectively stop harassing debt collection actions by finance companies and financial institutions such as banks.

As long as there is sufficient information on debts, income and expenditure, we can meet in the morning and file papers to arrange for bankruptcy in the afternoon.

Our team goes to the court and the Bankruptcy Office every day and scheduling is done promptly with the first priority. However, the bankruptcy hearing dates are scheduled by the Court Registry and it is up to them to decide. It now takes more than a month from the filing of the petition to the hearing date.

You are very welcome to call our solicitors and there is no charge for telephone consultations. The free advice we give you is in no way limited to bankruptcy, but if you are able to pay your debts, we will advise you to choose a DRP debt relief plan or an Individual Voluntary Arrangement (IVA) without applying for bankruptcy, ensure you could understand that bankruptcy is done only for compelling reasons.

Depending on the creditor, you are urged to consult with our experienced solicitors about your individual case and they will advise you and provide you with corresponding solutions.

If you are able to repay your debts, we would recommend you to choose DRP Debt Relief/IVA Debt Restructuring to restructure your debts without going bankrupt. We are also highly experienced in handling DRP Debt Relief/IVA Debt Restructuring. Our advice is comprehensive so that you could understand that bankruptcy is done only for compelling reasons.

Our clients only have to go to our law firm once or twice to file for bankruptcy subsequently, so that it is not uncommon for them to finish filing for bankruptcy by only visiting our firm only once or twice.

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