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Insolvency

Insolvency by definition is the inability to meet financial obligations as and when they fall due. Insolvency is usually seen as a synonym of Bankruptcy, however this is not the case. Bankruptcy is a solution which insolvent individuals can undertake to remedy their insolvent financial position.

What are the options for dealing with insolvency?

If you are insolvent, it does not necessarily mean you have to declare yourself Bankrupt. Statistics reveal that about one in five insolvent individuals now avoids bankruptcy, by means of an Individual Voluntary Arrangement (IVA), a part of the UK Insolvency Act 1986. An IVA is a formal arrangement with creditors whereby you pay back only what you can afford for a fixed period, at the end of which any remaining debt is written off. Unlike Bankruptcy, individuals entering into an IVA keep control of their assets. Bankruptcy can also lead to individuals losing their job or affect progression within a career, whereas entering into an IVA could avoid this.

A Debt Relief Order (DRO) could also be considered by insolvent individuals who meet set criteria. A DRO is a fast track bankruptcy for individuals who do not own any assets of significant value and have little or no surplus income available once basic living costs have been accounted for.

Deciding which solution is best suited to you can be difficult without professional advice. Our expert insolvency practitioners can take you through the advantages and disadvantages of each solution and advise which one is most appropriate to your personal circumstances.

How can I prevent becoming Insolvent?

There are a number of options that you can consider to regain control of your finances. For individuals who have a disposable income but are subject to high contractual repayments over a short term, or high levels of interest and charges added to balances on a monthly basis, alternative solutions are available to help avoid becoming insolvent.

One solution could be to restructure or refinance existing debts with creditors to reduce monthly payments to a more affordable amount. A re-mortgage or debt consolidation loan could also be considered as a way to make repayments more affordable. Alternatively a Debt Management Plan (DMP) could be undertaken through which a third party will attempt to negotiate reduced or frozen interest and lower monthly repayments to creditors on your behalf.

The best way to avoid insolvency is to recognise the symptoms of financial difficulty and tackle them as soon as possible. If you are experiencing missed creditor payments, creditor phone calls, payment reminders through the post, continued use of overdraft facilities to meet outgoings or threats of legal action it is time to seek advice. Whatever your circumstances there will be a debt solution suitable for you.

For a free and impartial assessment of your circumstances contact our insolvency practitioners today on 0800 988 9345.

Or complete our online application form for quick insolvency advice.

Further reading:
Debt | Debt Advice | Debt Solutions | Debt Solutions FAQs | Debt Management Plans | Individual Voluntary Arrangement (IVA) | Bankruptcy | Insolvency | Debt Relief Orders (DRO) | County Court Administration Orders