Bankruptcy and insolvency result from imprudent bookkeeping and budgeting measures. Here are some measures to counter it.
Before you think about bankruptcy as a debt solution and how to avoid it, you need to understand the difference between bankruptcy and insolvency.
Bankruptcy is specifically a legal process that is undertaken when the individual can no longer afford to pay off any of his debts. Due to unfortunate circumstances, if you have come to the conclusion that bankruptcy is your only option, you can file for bankruptcy yourself. A creditor can also file to have you made bankrupt in the situation if you owe them £5,000 or more. A court can then order that you are bankrupt. This way, you are allowed to seek relief from your accumulated debts.
Insolvency, on the other hand, is a state of financial being. When you can no longer pay your debts when they are due, you are insolvent. So, you are insolvent when you file for bankruptcy. Usually, insolvency is used to refer to a business.
Primary differences between bankruptcy and insolvency are:
- Bankruptcy is a legal process or court order, while insolvency is a state of financial distress.
- Bankruptcy isn’t your only way out of insolvency.
- Bankruptcy applies only to individuals and sole traders who have unlimited liability. Insolvency applies to businesses as well as individuals.
How to counter bankruptcy and insolvency
Do you know what can lead to bankruptcy and insolvency? Not staying on top of your cash flow with proper bookkeeping and budgeting. So you need to be judicious in your bookkeeping and budgeting your finances. You can also go for business and personal insurance to protect you from lawsuits or income loss. Even a healthy business can become insolvent if its finances are not taken care of efficiently.
An accountant can be very useful in managing your finances if you are a business owner. You can keep track of your balance sheet through the accountant. A good accounting professional brings down your risk of becoming insolvent.
Worried about insolvency?
If you’re worried that you could become insolvent, you need to get independent advice from rescue and recovery experts. This needs to be done before it’s too late. This action will help put procedures in place to ease cash flow and avoid insolvency. Some of these measures include:
- You negotiate with your creditors via an informal arrangement
- You set up a sole trader voluntary arrangement
- You chase your debtors for debt payment
- You sell your assets
Worried about bankruptcy?
There are times when your creditors could threaten you with bankruptcy. This could be inappropriate if you owe less than £5000. In such cases, there are five steps you can take to counter any measures that creditors might take to make you bankrupt. These are:
- You should not ignore a statutory demand.
- You should check if you’re responsible for any debt you’re being chased to pay.
- If you are responsible for the debt, you can consider whether bankruptcy could be a better way to deal with all your debts.
- You can even go ahead and consider some other formal debt solution that could be better for you.
- You can speak to your creditors and negotiate with them some way to pay the debt if you don’t want to become bankrupt.
Searching the bankruptcy and insolvency register
You can take the step of searching for details of people in the bankruptcy and insolvency register. This register details people who have gone bankrupt or if they have signed an agreement to deal with their debts in England and Wales.
Search the Individual Insolvency Register
You can search the individual insolvency register by name or trading name to get information about insolvency cases in England and Wales. This includes:
- Bankruptcies and the date of a discharge from debts
- Debt relief orders
- Individual Voluntary Arrangements
All such records in the register are removed within 3 months of an insolvency case ending.
We hope we shared some good points related to bankruptcy and insolvency in the UK in this post. Please contact your trusted debt adviser for advice best suited to your life circumstances.
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