Insolvency Made Clear: A Guide for Debtors

Preface: the effects of the pandemic
This book was written and is being published during the Covid-19 pandemic.
The pandemic affects this book in three ways.
Firstly, and most importantly, through an increase in the number of people
and companies going insolvent. The Office of National Statistics estimated that
there was a 10% fall in GDP in 2020, and the central forecast of the Office of
Budget Responsibility in March 2021 predicted that the rate of unemployment
will peak at almost double its pre-pandemic level. The impact will not be felt
evenly throughout the economy: companies and people working in certain
sectors, such as accommodation and food services, are forecast to be most affected.
To some degree, the country has been protected from the impact of the
recession through Government spending on schemes like the Coronavirus Job
Retention Scheme and Local Restrictions Support Grants. This has allowed the
private sector to repay its creditors using public funding. However, as the United
Kingdom returns to ‘the new normal’ and the emergency funding stops, some
debtors will be unable to repay their debts. Creditors will consider bankruptcy
and winding up petitions as a means of seeking a return on their debts when
other means fail.
Secondly, the Government has made changes to English insolvency law in response
to the pandemic, sometimes with retroactive effect. The law might have
changed following publication of this book. The most likely candidates for
change are the rules for possession proceedings, the presentation of winding up
petitions, and the application of wrongful trading provisions. These rules have
already changed more than once since March 2020. If the law does change, it is
likely to be more generous to debtors as the Government seeks to provide short
term protection while the economy recovers from the pandemic.
Finally, this book presents insolvency statistics to offer context to the rules it
describes. Statistics from 2020, where they are available, are likely to mislead:
neither the court nor creditors acted in the same way from March 2020 as they
did in 2019. In particular, there are presently restrictions on putting a company
into compulsory liquidation (see Chapter 13) and, although there are not similar
restrictions on bankruptcy proceedings, many creditors are avoiding insolvency
proceedings. HMRC, for example, has permitted the deferment of VAT
and income tax payments, and it did not petition for bankruptcy or winding
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