Insolvency is a complex legal and financial issue that occurs when a person or a business is unable to pay its debts. In the UK, there are several ways to potentially address insolvency, depending on the circumstances. In what follows, we will present seven possible solutions for different types of insolvency. Each insolvency requires a subjective approach depending on its complexity.
The debtor can negotiate informally with their creditors to work out a repayment plan or debt restructuring arrangement. This may involve negotiating new terms for repayment, such as reduced payments or extended timelines, with the agreement of the creditors.
Individual Voluntary Arrangement (IVA)
An IVA is a formal agreement between an individual debtor and their creditors, supervised by a licensed insolvency practitioner. It allows the debtor to repay a portion of their debts over a fixed period of time, usually five years, while the remaining debts are typically written off.
Debt Relief Order (DRO)
A DRO is a formal insolvency procedure for individuals with low levels of debt and little or no assets. It allows eligible debtors to have their debts written off after a one-year moratorium period, during which they are protected from creditor action.
Company Voluntary Arrangement (CVA)
A CVA is a formal agreement between a company and its creditors, supervised by a licensed insolvency practitioner. It allows the company to repay its debts over a fixed period of time while continuing to trade, with the agreement of its creditors.
The Administration is a formal insolvency process for insolvent companies that provides protection from creditor action while a licensed insolvency practitioner takes control of the company to try to rescue it as a going concern or achieve a better outcome for creditors.
Liquidation is a formal insolvency process that involves winding up a company’s affairs and distributing its assets to its creditors. This can be done through a voluntary liquidation (Members’ Voluntary Liquidation or Creditors’ Voluntary Liquidation) or through a compulsory liquidation ordered by the court.
Bankruptcy is a formal insolvency process for individuals that involves the realization of their assets to repay their debts. It may result in the discharge of the individual’s debts, subject to certain restrictions and obligations.
It’s important to note that insolvency laws and procedures in the UK are complex and subject to change, and seeking professional advice from a licensed insolvency practitioner or a qualified legal professional is recommended to determine the most appropriate solution for a specific situation. If you are in such a situation, contact us urgently and we will help you through our accredited partners in solving insolvencies. Don’t worry about the whole process, we guarantee professionalism and discretion.
Interested in more accounting topics? You can try also: