Solutions overview

There are a number of debt solutions available for individuals and businesses and it is important at all times you take the correct advice before deciding, which is the most suitable for your circumstances and be prepared that sometimes a mixture of these solutions may be required to achieve the desired outcome.

Companies

As a director of a limited company you have a legal obligation to ensure the company finances are in order. By allowing a company to trade when it’s insolvent and there is no prospect that its financial situation will improve you are personally at risk.

When a company goes into liquidation, administration or administrative receivership, the administrator, receiver or liquidator will review the actions of the director when submitting their report to the DTI. This can result in being disqualified from acting a company director for a period of between 2 and 15 years and personally liable for the debts incurred.

If you are struggling with business debt and your company could be heading towards insolvency, don’t delay in seeking professional advice as to whether you should continue to trade.

We may advise that you to consider options, such as a Company Voluntary Arrangement, Administration Order, Liquidation or, if possible, an informal arrangement.

Individuals

Bankruptcy if handled the right way is a very effective solution, however, once a bankruptcy order has been made your assets will come under the control of the Official Receiver who will also investigate your affairs. Although it will clear most debts, there are consequences to bear in mind.

There are plenty of myths and misconceptions surrounding bankruptcy and often you will hear people or debt organisations tell you to avoid it at all costs. The best advice that you can receive is to speak to an expert and weigh it up with all of the other solutions.

Individual Voluntary Arrangements are very popular owing to the high profile marketing efforts of many debt advice organisations. If you manage to stay the course and complete your IVA then you will become debt free at the end. Typically, they last for five years but can be extend to six years under certain circumstances. You will be offering your creditors all of your disposable income each month, you may have to give up some assets and if you are a property owner you may have to release equity from it. An IVA is a formal insolvency solution and is often sold as an easy solution for all, which it is not. A failed IVA may still lead to bankruptcy.

A debt management plan is an informal repayment plan based on your monthly disposable income. Your creditors are not obliged to accept the plan or agree to suspend further action against you, however, in practise most creditors tend to work with the debtor. There are various organisations about who undertake this type of work with a view to bringing your debt repayments back within your budget so that you can repay your debts and avoid formal insolvency.

Debt management will in most cases lead to many years of living in debt and the constant pressure it brings. For this reason, a debt management plan should only ever be considered a short term plan whilst a solution is found. However, if debt management is the most suitable method of dealing with your debt, we will help you put that in place.

A negotiated settlement of your debts is also worth consideration if formal insolvency is inappropriate and you can raise the necessary funds. Each of your creditors will need to accept the settlement offer and as negotiations are carried out individually with each creditor it can take time to achieve all the settlements.

A Debt Relief Order is a formal insolvency solution for individuals with debts under £15,000 and is essentially a low cost bankruptcy. To qualify you will need very little in the way of assets or disposable income.

The most appropriate solution for individuals may be a combination of the options available or it may be very straightforward, however, one thing is always evident when we speak with clients – everyone’s situation is different and as such all solutions have positives and negatives, which must be considered and dealt with before final delivery of the a solution.

Take independent advice from someone who understands how all solutions work in practice. Call us now for a no obligation discussion 0330 400 0481
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