Thursday, 28 April 2011

Will the Olympics cause an upsurge in bankruptcy? Gambling and rash and hazardous speculation or unreasonable extravagance which may have materially contributed

Some commentators have called the Olympic ticket bidding process 'reverse gambling.' (e.g. the BBC). This is because applicants have apparently been bidding for more tickets than they might be able to afford. In other words, applicants are hoping that they will not get all of the tickets that they have applied for. If they do get all the tickets they have applied for they will be hugely over exposed with immediate effect. This is because applicants' accounts will be debited with the ticket costs automatically on the 22nd June 2011. Applicants will not know that these payments have occurred until the money has been taken from their accounts. This may mean that a number of Olympic ticket applicants may suffer liquidity issues as a result of the process. The applicants will also not be able to sell their tickets on until 2012. The BBC are reporting that two people have applied for £22,000 worth of tickets.

Will we see redress to the personal insolvency laws as a result of this Olympic ticket bidding process? If we do will the 'reverse gambling' nature of the process give rise to BRO or BRU culpability for gambling or even rash and hazardous speculation or unreasonable extravagance which may have materially contributed to the bankruptcy? Schedule 4A of the Insolvency Act 1986 governs Bankruptcy Restrictions Orders (BROs) and undertakings (BRUs). The grounds for making order are:

"(2) The court shall, in particular, take into account any of the following kinds of behaviour on the part of the bankrupt—
(a) failing to keep records which account for a loss of property by the bankrupt, or by a business carried on by him, where the loss occurred in the period beginning 2 years before petition and ending with the date of the application;
(b) failing to produce records of that kind on demand by the official receiver or the trustee;
(c) entering into a transaction at an undervalue;
(d) giving a preference;
(e) making an excessive pension contribution;
(f) a failure to supply goods or services which were wholly or partly paid for which gave rise to a claim provable in the bankruptcy;
(g) trading at a time before commencement of the bankruptcy when the bankrupt knew or ought to have known that he was himself to be unable to pay his debts;
(h) incurring, before commencement of the bankruptcy, a debt which the bankrupt had no reasonable expectation of being able to pay;
(i) failing to account satisfactorily to the court, the official receiver or the trustee for a loss of property or for an insufficiency of property to meet bankruptcy debts;
(j) carrying on any gambling, rash and hazardous speculation or unreasonable extravagance which may have materially contributed to or increased the extent of the bankruptcy or which took place between presentation of the petition and commencement of the bankruptcy;
(k) neglect of business affairs of a kind which may have materially contributed to or increased the extent of the bankruptcy;
(l) fraud or fraudulent breach of trust;
(m) failing to cooperate with the official receiver or the trustee."

Picture Credit:  http://www.olympics-accommodation-finder.com/files/olympic%20rings2.JPG

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