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Bankruptcy and IVAs
We regularly advise Insolvency Practitioners (IPs) in relation to individuals who are unable to pay their debts who are seeking financial relief. The two main options for individuals are:
- Bankruptcy
- Individual Voluntary Arrangements.
Bankruptcy
Bankruptcy is a formal process where an individual seeks a court order declaring him/her bankrupt. Once the order is made the individual will be interviewed by the Official Receiver, a civil servant who works within the Insolvency Service who manages the first part of a bankruptcy. The IP will then be appointed as the Trustee in Bankruptcy (in cases where there isn’t an insolvency practitioner involved the Official Receiver will take on this role) and will have wide powers to dispose of assets, recover assets or monies owed to the bankrupt and distribute the proceeds fairly.
Bankruptcy usually lasts for 12 months but the effects of bankruptcy last much longer. Individuals will not be able to obtain credit post-bankruptcy, and some may have bankruptcy restriction orders made against them that can last for up to 15 years.
As well as advising IPs, we also advise creditors who may seek a bankruptcy order against an individual who owes them money (must be over £5,000) and individuals in settlement proceedings relating to the bankrupt’s assets, for example a spouse seeking to buy their spouse’s interest in the matrimonial home.
We can also advise individuals who are in financial distress about the best process for them to use.
Individual Voluntary Arrangements (IVAs)
IVAs are a formal insolvency process where an individual will enter into a formal and legally binding agreement with his/her creditors to pay back his/her debts over a period of time.
An IVA will be set up by an IP. If you think an IVA is suitable for you, we can introduce you to an IP who can assist. The IP will work out a payment proposal that will be put to the individual’s creditors who will decide whether they agree with it or not.
For individuals with insignificant assets and less than £20,000 of debt, a debt relief order may be appropriate.