Personal Insolvency

“for individuals and sole traders / partnerships”

Personal Insolvency can take many forms and there are several options if you are suffering from extreme personal cash flow problems and cannot pay your debts.
Personal insolvency options can include:
  • Bankruptcy
  • Individual Volunatary Agreements (IVA)
  • Debt Relief Orders (DRO)

bankruptcy may get rid of debt but there are consequences

Bankruptcy is for individuals and may be used to clear debts and often, but not necessarily, be discharged as being a bankrupt in just one year. It is used when debts simply cannot be paid and a creditor or creditors decide to go to the court to take action. It is also possible to make yourself bankrupt. An official receiver, or insolvency practitioner, is appointed to handle the bankruptcy. They have the power to realise any assets, including your home, to pay creditors what is possible. During the bankruptcy period it will be difficult if not impossible to obtain credit, be a director of a business or hold certain positions such as an accountant or solicitor. Your bankruptcy will stay on credit reference files for six years and obviously affect your ability to obtain credit for many years.

IVA / Individual Voluntary Agreement lets you keep your home

An IVA is a method of handling your debts with protection from your creditors without losing all your assets. Typically you agree what you can afford to pay back to your creditors by periodic payments. The period of an IVA is usually five to six years and at the end of the term any remaining debt is written off. Over 75% of your creditors need to agree to the debt repayment plan for an IVA to be accepted.

DRO  / Debt relief orders if you owe less than £20,000

A Debt Relief Order (DRO) is a way to write off debts if they total less than £20,000 and you don’t have many assets, and this really does mean very few assets e.g. less than £300, and a car worth less than £1,000. This is not available to home owners and your spare cash after reasonable living is less than £50 per month.  The period is usually 12 months in which you don’t have to pay anything and the debts will be written off after that period.

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