Five FAQs about debt and insolvency
What is insolvency?
Usually linked to businesses, a company is said to be insolvent if the business doesn’t have enough money to continue trading in the normal way. You can make your company voluntary insolvent, or any of your creditors can also apply for an insolvency order from the courts.
What is bankruptcy?
If an individual can no longer pay their debts, they are said to be bankrupt. A person is made bankrupt through a court order. Anyone that finds they are facing bankruptcy should take legal advice from a specialist solicitor. A solicitor will be able to assess your particular circumstances and advise you on the alternatives that may be available. HMRC (HM Revenue & Customs) can also apply for a bankruptcy order for any unpaid tax your business owes.
What action can I take regarding my debts and possible bankruptcy?
The most important thing is to not ignore your debt problems. Your solicitor can help you come to an arrangement with your creditors. Often, coming to a mutually agreeable arrangement for repayment can ensure you do not have to become bankrupt.
Would I lose my business if it becomes insolvent?
In most cases it is preferable to keep your business operating if you think it would eventually be able to pay the debts it owes. Your company and commercial solicitor can negotiate with your creditors for more time to develop your business into a profitable concern. However, your company may be put into compulsory liquidation by the court which means it will be wound up and can no longer trade.
Should I always have legal representation if I or my business cannot repay our debts?
Yes, as you or your business could be issued with a bankruptcy order or a liquidation order by your creditors. In these situations it is vitally important to have to advice and support of a specialist insolvency solicitor. The solicitor can give you options, and in most cases negotiate with your creditors to find a suitable alternative.
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