How to avoid bankruptcy

If you are in financial difficulties and are unable to pay your debts, you are at risk of becoming bankrupt. To become bankrupt, a petition for bankruptcy must be made by either the debtor themselves, or by a creditor or group of creditors. However, it is important to try to avoid bankruptcy if at all possible.

If a creditor wishes to petition for your bankruptcy, you must owe that creditor £750 or more. If you do not owe the creditor £750 or more, they can join with another creditor, or group of other creditors, so that the total amount owed is £750 or more. In the alternative, the debtor can petition for their own bankruptcy by alleging to the court that they cannot pay their debts. When this happens, the debtor places the responsibility for their financial affairs in the trustee in bankruptcy.

If the debtor wishes to avoid bankruptcy, one way of doing so is to enter into an Individual Voluntary Arrangement (IVA) with creditors. This can only happen in certain circumstances and may require the approval of the creditors. In order to enter into an IVA, an insolvency practitioner must draw up a proposal and present it to the court, the insolvency practitioner must inform the court whether it is worth calling a meeting of creditors and if they do, a 75% majority must agree to the proposal. For many debtors it important to avoid bankruptcy because of the constraints on day-to-day life that bankruptcy imposes.

An insolvency solicitor and an IVA can help you to achieve this.

If you would like to obtain legal advice on bankruptcy or information on how to avoid bankruptcy, Contact Law can put you in touch with a local specialist Insolvency Solicitor free of charge. So, if you have any questions or would like our help in finding local Insolvency Solicitors please call us on 0800 1777 162 or complete the web-form above.