The proceedings in bankruptcy are begun by the presentation to the court of a Bankruptcy Petition. This petition asks the court for a Receiving Order to be made in respect of a debtor’s property. The petition may be presented either by the Debtor himself or by a Creditor. If it is presented by a creditor the petition must be founded or based on an alleged act of Bankruptcy which has occurred within 3 months before the presentation of the petition. Indeed the acts of Bankruptcy are in effect statutory tests of insolvency.
If it is the debtor himself who presents the petition that in itself constitutes an act of bankruptcy. Upon hearing the petition the court may dismiss it, if it has no merit or make a receiving order if it is found to be with merit. This order does not make the debtor bankrupt but only places his property in safe custody pending the outcome of the proceedings.
The first meeting of creditors is then held at which it is determined whether a composition or scheme of arrangement if one is submitted by the debtor shall be accepted or whether application shall be made to the court to adjudicate the debtor’s bankruptcy. If the court decides to adjudicate the debtor bankrupt it makes an Adjudication Order and the debtor will then become bankrupt. The debtor’s property will then vest in his trustee in bankruptcy who will collect in the property and distribute it among those creditors who have proved their debts.
The bankrupt must also submit himself to a Judicial Public Examination and at any time after conclusion of this public examination the bankrupt can apply for his Discharge.
If the court makes an order of discharge the bankrupt is released from all his debts with certain exceptions provable in bankruptcy and is freed from disabilities against some exceptions which were imposed upon him by the bankruptcy.
WHO IS A CREDITOR & WHO IS A DEBTOR
A creditor is any person who is entitled to enforce payment of a debt at law or equity. The Bankruptcy Act (BA) Section 3(2) defines who a debtor is. It states that a debtor includes any person whether domiciled in Kenya or not who at the time when any act of Bankruptcy was done or suffered by him
(a) Was personally present in Kenya; or
(b) Ordinarily resided or had a place of residence in Kenya; or
(c) Was carrying on business in Kenya personally or by means of an agent or manager or
(d) Was a member of a firm or partnership which carried on business in Kenya and includes a person against whom bankruptcy proceedings have been instituted in a reciprocating territory and who has property in Kenya