Money and How to Clear your Debts (Insolvency)

What does an Insolvency Practitioner do?

To understand what an insolvency practitioner actually does, it is necessary to understand the term "insolvency". Insolvency simply means the inability to pay off your debts. In other words your income or assets are insufficient to pay off all your creditors. For an individual, your debts could include a mortgage, rent arrears, getting behind with fuel bils, council tax or phone bills, credit card debts, or a HP agreements, for example. Your creditors, therefore, can include your bank or building society, a fuel provider, or telephone company, and so on. Your assets may include your home, if you own one, your car and other luxury items, as well as any savings, investments and future income. For business, debts these can include loans, lines of credit from suppliers, or a mortgage on business premises, while assets could include the business itself, the premises, and money owed by customers.


As an individual, if you receive letters from creditors, threatening court action, or if you are unable to keep up with any payments, you may be facing insolvency.

For a business, if your creditors are aware that your assets are less than your debts, they may decide to ask for their money returned, which again could lead to insolvency. In both cases, the situation is serious, and your first step should be to seek some professional advice. Individuals can get free advice from the Citizens Advice Bureau (CAB), who can help with making a budget, or working out a schedule for paying off any debts, and counsel you through your options. Businesses might choose to consult a solicitor or an accountant, or a specialist insolvency practitioner. As a sole trader or guarantor for a business loan, being unable to satisfactorily pay your creditors, may lead to you being made bankrupt. A business however, may face being liquidated.


During bankruptcy or liquidation procedures a civil servant known as an Official Receiver will take on the responsibility for investigating all aspects of the case. They will realise as much of the assets (of the business or individual) and pay off as much of the debt as possible. Any funds left over after paying expenses and the debts are given back to the debtor. In cases that involve large sums of money, or complex arrangements of assets, the official receiver can appoint an insolvency
practitioner to be a the trustee of a bankruptcy or liquidator of a business. They will take over the job of realising the assets to pay off any debts.

insolvency practitioners are paid fee based either on a percentage of the assets they realise, or at an hourly rate according to the time they spend in cases. An insolvency practitioner must also be appointed in the event of a business being wound up voluntarily.


An insolvency practitioner may also be engaged by an individual or business to advice on those concerned about their debts. They can also arrange Individual Voluntary Arrangements (IVAs) to pay off creditors according to an agreed schedule.

The decision to declare oneself bankrupt should not be taken lightly. Bankruptcy is an order made under the Insolvency Act 1986 which signifies that if individuals are unable to pay their debts this deprives them of property which is distributed among his creditors.

As the owner of a business, if you are made bankrupt then you can lose personal assets and your business. The insolvency practitioner acting as trustee may apply to restore property to the estate that was unfairly sold prior to the bankruptcy, such as selling a property to a relative for less than it is worth. Also they can claim up to 3 years of any future income from the debtor if this is deemed to be more than they need to cover basic living standards.

If you are concerned about your debts, and want to engage the services of a qualified insolvency practitioner, you could use online business directories such as www.searchme4.co.uk . All you have to do is search for 'Insolvency practitioners London' to obtain a list of relevant companies who may be able to help you or offer you advice.
 

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Having a Repayment Problem?

Contact your credit card companies and negotiate lower rates. Creditors will give customers with a good credit history a better rate to keep their business. Once you have rates as low as possibel, target the cards with the highest rates first, then work your way down the list. Look out for late payments. Creditors may tag payments received even 1 day after a due date with late fees and some companies may raise the interest rate on a card if payments are in arrears. Fees may also be large for accounts charged over the limit.

Do not ignore the situation, whatever you do!
You can get free help and advice from your local Citizens Advice Bureau (CAB) or Trading Standards Department on credit consolidation and the alternatives. Some will have a Money Advice Centre that deal specifically with financial problems. Another source of free advice and problem solving is the Consumer Credit Counselling Service, a charity which offers to liaise with creditors on your behalf and also provides counselling sessions to help you. National Debt line offers a similar service, but will advise callers how to help themselves, rather than act as an intermediary.