Seeking personal insolvency advice – what you need to know
Both individuals and businesses can find themselves threatened by insolvency procedures if they do not keep a careful eye on their finances.
The key to any potential recovery is to act quickly, which means an understanding of what to look out for is required.
Once an issue is spotted it is best to seek advice from insolvency practitioners to provide both detailed reports and guidance on what to do next.
General and specific advice can relate to any number of issues, but mainly information relating to individual voluntary arrangements, partnership voluntary arrangements and bankruptcy are sought.
Individual Voluntary Arrangement
An IVA is where an offer to the creditors is made which is better than what they would receive if they opted for bankruptcy.
It is recognised as a legal procedure and any agreements are viewed as binding, often detailing how any debts and liabilities will be dealt with by the individual concerned.
An IVA is considered as a viable option as it allows for the individual to retain control of their business and to continue life in the same way as before.
Essentially, an individual can repay their liabilities – either in part or in full depending on what can be afforded – over a certain period of time, while taking aspects such as Inland Revenue and VAT into account.
Partnership Voluntary Arrangements
Similar situations can also exist in partnerships and partners may wish to avoid the business being petitioned into liquidation and individuals potentially facing bankruptcy.
This can occur for many reasons, as partners may wish to avoid the stigma associated with bankruptcy and to avoid any relevant professional qualifications from being lost.
A PVA is also considered so that a business can continue trading, which is a benefit to creditors, or when it could be sold as a going concern to generate a higher return.
It is a formal agreement between partners of the business and creditors, which sees the partnership repay the creditors from future profits or via the sale of assets.
If a creditor presents a bankruptcy petition to a court and the court then makes the order, bankruptcy occurs.
All of a bankrupt company’s assets are then vested in their trustee who realises them for the benefit of any creditors.
However, changes to the Enterprise Act 2002 mean that individuals can obtain a discharge from bankruptcy after 12 months, as long as appropriate circumstances allow for such a move.
By Phil Smith