Were you made bankrupt and sought assistance from or approached by a claims management company? Have you obtained bridging finance in order to repay your debts in bankruptcy to apply for an annulment? Are you now unable to repay the bridging loan which has high interest rates? We are specialist bridging loan lawyers who can assist you in your dispute with the lender, broker or adviser.
Bankruptcy annulment assistance from non-legal representatives, advisers and bridging brokers
Once you are declared bankrupt, there are restrictions you need to comply with and you may not become a director. Bankruptcy can also affect your credit score and your ability to obtain future financing.
Cancelling your bankruptcy puts you back in the same position legally as if the bankruptcy order had never been made. any property or belongings that haven’t yet been disposed of will be given back to you
You can apply to annul your bankruptcy on the basis that all of your debts and expenses have been repaid in full or to the satisfaction of the Court.
This is where third parties such as claims management companies will assist you in obtaining funds to repay your debts. This is commonly done by obtaining a bridging loan or other short term finance.
What is a bridging loan?
A bridging loan is a temporary short term financing option normally with a maturity of less than 18 months and which is usually secured against a property.
Bridging finance provides quick access to, what can be, large sums of money ordinarily used by a borrower purchasing a property or repay debts e.g. debts in a bankruptcy.
Bridging loans are ordinarily a financing means of last resort given that they come with much higher interest rates than traditional mortgages and are typically offered by advisers, specialist bridging finance companies and mortgage brokers and are not normally offered by high street banks.
What if I cannot afford to repay my bridging loan after the annulment?
Bridging loans often have very high interest rates and even higher default rates. Failure to repay a bridge loan will likely lead to repossession and very significant adverse costs consequences.
Bridging agreements can be complex financial agreements and it is important to seek legal advice before entering into such an arrangement.
Is the bridging loan secured on your residential property?
Quite often, a bridging loan will be secured on residential property as a bankrupt’s only asset. This means failure to repay the loan can lead to possession proceedings. There are certain rules with which regulated companies need to comply and advice that needs to be given when proposing a finance arrangement to be secured on a residential property.
You should seek legal advice before entering into any agreement which necessitates a charge to be put on your property, especially a residential property in which you personally live.
Examples of Bridging Loan Mis-selling claims
Bridging loans provided to inexperienced bankrupt borrowers
An inexperienced borrower can include for example a borrower who is inexperienced with financial services, has poor management of money or a history of bad debts or a borrower with limited grasp of English. In that case, undue influence or unconscionable bargain provides an equitable remedy to protect those from abuse from stronger parties under contract law.
Undisclosed links between brokers and bridging loan lenders
There are situations where an unscrupulous broker will recommend a borrower get the bridging loan from a sister company which will provide the loan financing. Often bankruptcy annulment advisers will refer the bankrupt to a connected bridging finance company to obtain funds and will benefit from a hefty commission.
In this case, borrowers may have a claim against the broker for a breach of the common law duty to advise. Moreover, particulars of claim would also include a claim for misrepresentation as the lender is really acting as the borrower’s agent when the true agency was between the lender and the broker.
Bridging loans to individuals by lenders without a consumer credit licence
Loans made by lenders without a consumer credit licence to individuals such as bankrupts are illegal under the Consumer Credit Act 1974 provisions, which are now found in the Code of Conduct (COCON) section of the FCA Handbook.
If a bridging loan is provided to a bankrupt individual without a consumer credit licence then this may be unlawful (regardless of the purpose for which the loan was made).
Bridging loans which make it difficult for the bankrupt borrower to redeem
Borrowers in loan agreements which have onerous redemption clauses potentially have the equitable right to argue that a court should not enforce the terms of a contract that make it difficult to repay. This equitable doctrine is known as “clogs on the equity of redemption”, Lindley M.R. in Santley v Wilde (1899) 2 Ch 474 provided the first expounding of this equitable principle:
“Any provision inserted to prevent redemption on payment or performance of the debt or obligation for which the security was given is what is meant by a clog or fetter on the equity of redemption and is therefore void. It follows from this, that ‘once a mortgage always a mortgage”
What may be considered to amount to a clog includes onerous penalty clauses or unconscionable repayment provisions (such as redemption only permitted if one lump sum payment is made), may be considered to be caught by the equitable doctrine.
If you have been recommended or encouraged to enter into into a bridging loan which makes it difficult to redeem, then seek legal advice as soon as possible as you may have a claim once the loan agreement has been analysed, the circumstances surrounding the parties entering into the loan have been ascertained, the amount advanced quantified and the nature of the transaction understood.
Unsigned documents, documents signed in blank and altered documentation
There have been cases where borrowers of bridging finance have alleged that a lender has inappropriately used a document signed in blank. Signing any blank form is not recommended at all, which can be fraudulently used against a borrower. When signing in blank, the lender acts as an agent to to fill in the details agreed to by the borrower. However, the key question is the extent of such agency and it is a factual question for the court to ascertain the scope of the agency. The key takeaway is that a broker or lender cannot receive a document signed in blank from a borrower and do whatever they want with it.
Why should you use specialist lawyers instead of a claims management company?
Claims Management Companies (CMCs) are only regulated by the Ministry of Justice and are not law firms made up legally qualified solicitors and barristers. CMCs can only complain to the Financial Ombudsman Service (FOS).
They cannot issue legal claims nor represent their clients at Court and may lack expertise in this area. You do not need a CMC to assist you and they do not have the required specialist knowledge and understanding of the insolvency rules when making applications relating to bankruptcy.
Why you should use specialist bankruptcy lawyers
We are leading experts specialising in Bankruptcy Petitions. We regularly assist with issuing petitions or setting aside statutory demands or defending petitions. We also specialise in making bankruptcy annulment applications.
We can guide you through the minefield of complex bankruptcy rules and procedure and help your company to manage the entire process.
We have years of experience in negotiating with creditors and their solicitors (in particular HMRC). We regularly represent our clients in the High Court/Bankruptcy Court and successfully obtain adjournments (e.g. to allow time to negotiate and settle or to defend a bankruptcy petition) or apply for annulment.
Can my bankruptcy be cancelled?
If you are made bankrupt, your assets, including your home (if you are the sole owner), will be transferred to your trustee in bankruptcy. This will not be reversed when you are discharged. You can however apply to have your bankruptcy annulled and it will be treated as if it had never happened and your assets will be restored to you. You can apply to have your bankruptcy annulled on the following grounds:
- The bankruptcy order should not have been made;
- The bankruptcy debts and expense of the bankruptcy have all been paid or secured to the satisfaction of the court; or
- You have entered into an Individual Voluntary Arrangement since the bankruptcy order was made.
How do I annul my bankruptcy?
To annul your bankruptcy you must submit an application to the court, which will include a witness statement and evidence. You will also be required to pay a court fee.
The court will then list your application for a hearing.
It is important you get legal advice throughout the process and a legal representative to represent you at any hearing in order to get the best possible outcome and your bankruptcy successfully annulled.
Book an Initial Consultation with Our Financial Services Litigation Lawyers
Our Financial Services Litigation team of Solicitors and Barristers in London are highly experienced in mis-selling litigation and specialise in representing SMEs, high net worth individuals and companies in high value bridging finance mis-selling disputes. Our high profile and high value cases regularly appear in the national and international media. We have successfully managed and settled mis-selling court litigation against all major UK banks and regulated financial advisers.