Bankruptcy & Insolvency

Bankruptcy and insolvency are legal processes for addressing situations where individuals or businesses are unable to meet their debt obligations.

Bankruptcy typically involves a court-ordered process in which the debtor's assets are liquidated to pay off creditors, providing a fresh start for individuals or businesses.

Insolvency is a broader term that indicates financial distress where liabilities exceed assets, leading to potential restructuring, administration, or liquidation of the debtor's assets. Both processes aim to provide a fair and orderly means of resolving debt issues, protecting the rights of creditors while offering relief to debtors.

What is bankruptcy?

Bankruptcy is a legal process for individuals or businesses that are unable to repay their outstanding debts. It involves the liquidation of assets to pay creditors, with the goal of providing a fresh financial start. Bankruptcy typically results in the discharge of remaining debts after the liquidation process.

What is insolvency?

Insolvency occurs when an individual or business cannot meet its debt obligations as they fall due, or when liabilities exceed assets. Insolvency can lead to various legal procedures, including bankruptcy, administration, or liquidation, depending on the specific circumstances and the entity's status.

What are the main types of insolvency procedures? 

Common types of insolvency procedures include:

• Administration: A process where an administrator is appointed to manage the business's affairs and attempt to rescue it or achieve the best outcome for creditors.
• Liquidation: The process of winding up a company's affairs by selling its assets to pay off creditors. It can be voluntary (initiated by the company) or compulsory (ordered by the court).
• Company Voluntary Arrangement (CVA): A formal agreement between a company and its creditors to pay back a portion of its debts over time.
• Individual Voluntary Arrangement (IVA): A formal agreement for individuals to pay back their debts over a period, usually five years, in exchange for a partial discharge of remaining debts.

What is the role of insolvency solicitors?

Insolvency solicitors are legal professionals specialising in insolvency and bankruptcy matters. They provide advice and representation for both individuals and businesses dealing with insolvency issues, including:

• Advice on Insolvency Options: Guiding clients on the most suitable insolvency procedures.
• Legal Representation: Representing clients in insolvency proceedings, negotiations, and court actions.
• Document Preparation: Preparing and filing necessary legal documents related to insolvency and bankruptcy.
• Debt Negotiation: Assisting in negotiating with creditors to reach favourable settlements or arrangements.

How does bankruptcy affect my credit rating?

Bankruptcy significantly impacts your credit rating, typically remaining on your credit report for up to six years. It can make obtaining new credit difficult during and after this period. The impact varies based on individual circumstances and how the bankruptcy is managed.