Personal Insolvency- The Current State Of Play

Sometimes a business needs to recognise when it’s not worth throwing any further money at it. New money or refinancing just aren’t going to help a business with more fundamental problems of profitability. Maybe the market has changed so much that your product or service no longer meets the needs of the consumer. Perhaps management are a bit long in the tooth and stuck in their ways and don’t have the drive, creativity or ability to adapt to the modern demands of the market.

So what should you do if you are an individual sole trader or partner in partnership that has got to the end of the road?

If you’ve managed to keep a good grasp on the business finances and you have no creditors then all you need to do is close the doors. If you have creditors that you can’t pay then you are insolvent and need to take a close look at your assets and liabilities.  Don’t forget as a sole trader you are personally liable for your business debts not just personal loans and overdrafts. Can you liquidate residual business assets to pay everything off? If not then your creditors have recourse to you personally and your own private assets, including your house if you own one.

We suggest that a bag of a fag packet calculation of your financial position isn’t enough. You really need to drill down deep into every aspect of your personal finances to gain a full and accurate view of your overall personal financial position. If you are insolvent, your creditors may not wait too long before they start taking action against you. Therefore it is imperative that you take charge of your own personal financial affairs before someone else does!!

We consistently tell all our sole trader and partnership clients that taking professional advice from an insolvency practitioner or someone suitably qualified and knowledgeable about bankruptcy and personal insolvency is very important indeed. In fact, you need to do so as a matter of urgency because the sooner you take advice the sooner you can put the right solution in place. Our friends at Kealey Consulting, whilst based in Liverpool, work all around the country advising people with personal debt. The head honcho there has decades of experience with bankruptcies. He will even give some informal advice over the phone and sometimes that’s all it takes to get pointed in the right direction.

You’re probably thinking that’s all very well but you can’t even consider going bankrupt because you have a family and a house and that losing your house is completely out of the question. Well that’s all the more reason why seeking advice as early as possible is best. The sooner advice is taken, the greater the range of options that could be available to you to sort out your personal debts. An IVA or a DRO may be better choices but it all depends on your circumstances. In fact the number of people going bankrupt these days is on the decline because of the increasing popularity of other options like Individual Voluntary Arrangements and Debt Relief Orders.

A Good Insolvency Practitioner CAN Help Save Your Company

Often times directors approach us more in hope than expectation. Usually they have been sent to us from our contact network because professionals around the city know we can help even in the most desparate situations. But of course there are times when we have to hold our hands up and say we can’t help directly. That is usually when a company’s situation has deteriorated so badly that throwing extra cash it would not be in anyone’s best interests. The lender would just be another addition to a long list of creditors.

In such a scenario though all is not always lost and a decent Insolvency Practitioner Manchester can often offer solutions and ways forward that directors are simply unaware of. We can’t guarantee of course that a business can always be saved no matter what the situation. If a company is not trading profitably and bills are coming in faster than the cash then the financial position of the company will only deteriorate further if it continues to trade.

What can an insolvency practitioner do to save a company?

We work with insolvency practitioners all over North West England and we know that a good one will take a look at the overall financial state of the business first. That involves taking stock of all the company’s fixed and current assets and their current values. Any security held against them will need to be taken into account as well. Then he will take a look at the extent of long term borrowings and short term liabilities including all trade creditors. In particular the insolvency practitioner (IP) will want to know where the company is up to with its payments to HM Revenue and Customs for corporation tax and VAT. The IP will start to gain a sense then of whether the company is insolvent and whether it can be saved in some way or whether the direcotrs need to be advised to place the company into liquidation.

Insolvency processes that allow companies to carry on trading

Company Voluntary Arrangement

If a debt rescheduling will help, your insolvency practitioner Manchester can put a company voluntary arrangement (CVA) in place. A CVA needs to be agreed by the company creditors but if it is then your company is protected against creditors taking enforcement action during the period of the arrangement. The key feature though of a CVA is that creditors agree to a manageable debt repayment schedule through payments being made from future trading. It is possible, common even, to not have to pay the creditors back in full in a CVA. The benefit to the company is it avoids possible worse alternatives, such as liquidation, and can carry on trading whilst the benefit for creditors is that a CVA acts as a repayment vehicle whereby the creditor gets more money back over time than would be the case if, for example, the debtor company ceased to trade and ended up in liquidation.

Administration

In an administration a company that is struggling in some way can put in place some form of restructuring through an Administrator, who must be a licensed insolvency practitioner. As long as the business is fundamentally viable, Administration can be a very useful way indeed of gaining some protection from creditors whilst the restructuring is implemented.