BANKRUPTCY OF AN INDIVIDUAL

Illustrative question 1.

Innocent a famous business man in the city ran into financial difficulties to the extent that he
couldn’t meet an appointment schedule on 15th May 1996 with his potential creditors whose
claims remained unpaid for a long time. Following this, a petition for bankruptcy was filed by
the same creditors on 30th March 1996. Immediately on the next day the Court issued a receiving
order. Prior to that, Mr. Innocent had escaped from his home. On 15th February 1996 there was a
serious day and night hunting, kept on by his furious creditors. As if that wasn’t enough, Mr.
Innocent had bluntly confirmed to Mr. Jongo on 3rd January 1996, that he could not, by all means
pay the claims. Being stubborn as he is, Mr. Innocent had on 20th December 1995 assigned a
substantial portion of his estate to his trustee by the name of Njagih Associates. Given below, is
Mr. Innocent balance sheet as at the day of the receiving order

NON CURRENT ASSETS TSHS TSHS

Premises 520,000
Office and Equipment 78,000
Furniture and Fittings 26,000
Total Non Current Assets 624,000.00
CURRENT ASSETS
Stocks 104,000
Cash 52,000
Total Current Assets 156,000.00
TOTAL ASSETS 780,000.00
CAPITAL AND LIABILITIES
CAPITAL
Opening capital 520,000
Profit 260,000
Drawings -650,000
Closing Capital 130,000.00
NON CURRENT LIABILITIES
Hire purchase Installments 46,800.00
18% Debenture loan 260,000.00
Total NON CURRENT LIABILITIES 306,800.00
CURRENT LIABILITIES
Workmen compensation 52,000.00
Bank Loan interest 31,200.00
Creditors 260,000.00
Total current liabilities 343,200.00
TOTAL CAPITAL & LIABILITIES 780,000.00
Addition information

a) Debenture Loan was secured on premises

b) Hire purchase installment is payable to Joseph, father in law to Mr. Innocent

c) Taxes amounting to TZS 66,300 was assessed on 25th February 1995 and were in the year
of income 1994

d) MR. Innocent personal debts comprised the following

• School fees TZS……......26,000

• Medical bills TZS………...13,000

• Alimony TZS………..130,000

• Cocaine supplies TZS………...19,900

While his personal assets consisted of

• Wearing apparel TZS………..208,000

• Furniture and Fittings TZS………...65,000

e) Mr. Innocent had personally guaranteed his friend Elia for a Bank loan of TZS 78,000 of
which TZS 29,000 remained unpaid
f) Included in the figure of creditors is an amount of TZS 130,000 lent by Mr. Donny on 2nd
January 1994 with no communication ever since

g) A further workmen compensation was anticipated at TZS 182,000

h) Mr. Innocent who has been trading as Gowel Enterprises discounted a bill for TZS
195,000. This bill is proved to have small chances of been honored on due date
i) Expected realizable value of identifiable assets are as follows

Premises Tshs 104,000

Office furniture Tshs 65,000

Furniture & Fittings Tshs 20,800

Stock Tshs 109,200

Required

a) When is the bankruptcy deemed to have commenced against Mr. Innocent

b) Compute the amount of deferred and unsecured creditors

c) Prepare Statement of Affair and Deficiency statement for Mr. Innocent estate