Trader in cash flow crisis overturns bankruptcy order

A sole trader has won a long running battle against a bankruptcy order after his business got into difficulties due to a cash flow crisis.

The trader, Mr Rafferty, bought and sold packaging machinery. Some of his customers were late settling invoices, so he was unable to pay £14,000 to a company called Sealants International Ltd.

Sealants served a statutory demand on him and obtained a bankruptcy petition. Mr Rafferty submitted invoices of £200,000 to one of his customers.

He said that once he received that money, he would be able to pay his debts. However, the judge refused to adjourn the case and made the bankruptcy order. Mr Rafferty then applied to annul the order.

There then followed a series of adjournments due to Mr Rafferty’s ill health.

Following more health-related delays, the judge refused a further adjournment and dismissed the application to annul the bankruptcy order.

The High Court reversed that decision. It held that something had clearly gone wrong in the case. The question of Mr Rafferty’s health had not been contested and the question of the further adjournment being refused was open to appeal.

An annulment was justified on condition that the debt and Sealants’ costs be paid.

The case illustrates the need to stay on top of debt control and cash flow to ensure that situations like this do not arise to threaten the viability of your business.

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