The arrest of glamour model Katie Price for failing to attend a court hearing relating to her second bankruptcy should be a wake up call for those who don’t cooperate in personal insolvency proceedings, whether they are previously High Net Worth individuals or not.
Accepting that she shouldn’t have been on holiday abroad instead of in court, Price said: “Whilst I understand the importance and severity of the matter I do feel like I am being treated like a criminal.” But that is the point: breaking a bankruptcy rule is a criminal offence; it could result in a fine or even a prison sentence.
Boris Becker’s two-and-a-half year custodial sentence after being found guilty in April 2022 of four charges related to his 2017 bankruptcy was a salutary lesson to those who fail to work satisfactorily with their Trustee in Bankruptcy, whether it’s directly with the Offical Receiver or with an external appointee. Becker was acquitted of a further 20 counts of breaching the Insolvency Act, but the remaining charges each carried maximum sentences of seven years in jail. They related to removal of property, concealing debt and two of failing to disclose estate.
Price, by contrast, is said to have failed to provide “the most basic information” in relation to her bankruptcies, offering only “piecemeal cooperation”. The Insolvency and Companies Court Judge who had issued the arrest warrant said she had not taken this action lightly.
Becker had been quick to reach for the defence of having been too “trusting and reliant” on advisers. This hasn’t been an issue with Price, but it’s rarely a compelling or credible argument in anything other than a very straightforward tax case. Cycling star Sir Bradley Wiggins, who was made bankrupt in June, complaining about his “army of advisers”, has since said he should have paid more attention to his own financial affairs. The five-times Olympic champion is not accused of non-cooperation.
Bankruptcy in the UK appears to be perceived differently in the UK from in other major economies such as the US. While it is a temporary status that may be viewed as ultimately constructive, providing an opportunity to ‘reset’, perhaps for reasons of culture and society in Britain the element of embarrassment and even shame can dominate the process for an individual, particularly one with a high profile. This may, in turn, lead to desperate behaviour in attempting to circumvent the post-bankruptcy framework, so risking criminal activity and consequences.
Courts in the UK are, however, generally reasonable in assisting those facing bankruptcy actions to find time to pay and to work with advisers on finding workable solutions for debtor and creditor, whether the latter is a bank, a company, another individual, or HMRC. Judges are, by and large, loath to grant bankruptcy orders unless they are satisfied that means and time to pay have been exhausted. Adjournments may extend such proceedings for several months and into years.
Independent Trustees in Bankruptcy, Insolvency Practitioners appointed by the Secretary of State or by a vote of the Creditors after a bankruptcy order, are legally bound to take appropriate action to seek out and recover a bankrupt’s assets for the benefit of their creditors. This work needs a high level of co-operation from the Bankrupt and Trustees will wherever possible try to work constructively with the Bankrupt. In return, a Trustee will aim to be largely reasonable in allowing acceptable and legal flexibility for a bankrupt individual to maintain a strong foothold from which to recover. Unsurprisingly, this constructive approach will not extend to maintaining “expensive lifestyle commitments” such as those in the Becker case – which will only serve to increase trustees’ (or the Official Receiver’s) scrutiny of assets and cash flows after multi-million pound bankruptcies.
Shares in private companies, interests in property, loans from non-traditional sources, boats and even cars (six in Price’s case, including a pink Range Rover) , art and jewellery, will be viewed extremely dimly if concealed from trustees. For their own good, newly bankrupt individuals should assume that hidden assets will be found and any concealment duly punished. Advisers to bankrupts should obviously resist being complicit. Prices’s airport arrest shows that there is a clear limit to the courts’ patience and is a dramatic shot across the bows of any individual thinking of making the same mistakes.
This article is written by Jo Milner, Managing Director at Buchler Phillips, an independent boutique firm, with an impeccable Mayfair London heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.