Bankruptcy

Bankruptcy occurs where a person is found to be unable to pay their debts. This could arise as a result of cash flow problems i.e. you can pay all debts eventually but do not have sufficient resources to pay those debts due now. Alternatively you could be facing a liability in the future which you know you cannot pay off. Under both circumstances a person can be deemed personally insolvent (i.e. bankrupt) and the Court is able to make a Bankruptcy Order. This will mean that your property will vest in a trustee in bankruptcy, who will distribute it amongst your creditors. As a possible way to avoid bankruptcy, please see individual voluntary arrangements below.

Any creditor is able to Petition the Court to make a debtor bankrupt if the amount owed is over £750 and the creditor can show the debtor cannot pay the amount, normally achieved by the service of a statuary demand. Alternatively a debtor may apply to make himself bankrupt in order to relieve the burden of financial pressures and place responsibility for his debts in the hands of the trustee. If you are either a creditor or debtor Hewetts can help you with this process.

A bankrupt has certain restrictions placed on him/her until the order is discharged. These include restriction on business activities such as trading and obtaining credit. Hewetts can advise you on your situation if required.

Individual Voluntary Arrangements (IVA)

A possible way to avoid bankruptcy is via individual voluntary arrangements. In order to do so the potential bankrupt must engage an insolvency practitioner to assist them. An interim order is required at the bankruptcy court in order to stop any proceedings being taken while his creditors consider the practitioner’s proposals. If the creditors approve the proposals then the practitioner will become a Supervisor and implement the proposal.

A voluntary arrangement is only suitable if the debtor has the means to make a reasonable offer of payment to his creditors. However the arrangement can be of great benefit to both creditors and debtors. The debtor avoids the stigma and disqualifications associated with bankruptcy as well as possible examination in an open court, and the creditor stands a greater chance of recovering their money in full. Hewetts has acted for debtors, creditors and supervisors over the years and we are happy to help.

We offer free initial advice, regardless of whether or not you later wish to instruct us to act for you.