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Bankruptcy Advice

If you feel your business is in financial difficulty it is important to deal with it immediately

FRP advisory are dedicated to giving you the best bankruptcy advice. Bankruptcy can be overwhelming for some people as they don’t know how this legal procedure works; thus leaving them unprepared for this unfortunate occurrence. Lots of the issues endured during Bankruptcy or debt can be depleted with the right knowledge hence FRP advisory can help you overcome the problems incurred from bankruptcy.

Introduction to FRP Bankruptcy Advice

  • Bankruptcy is the status of a person or organisation that is not able to repay the debts owed to creditors such as banks and investors.

     

    What is Bankruptcy?

    Bankruptcy is the status of a person or organisation that is not able to repay the debts owed to creditors such as banks and investors, for example. In a majority of cases, bankruptcy initiated by the debtor is imposed by a court order. In the United Kingdom, the term “bankruptcy” is applied solely to individuals and partnerships, and various forms of insolvency proceedings such as liquidation and administration are applied to firms. The United States utilises the term “bankruptcy” in a variety of insolvency proceedings.

    Speaking specifically to individuals who are made bankrupt, assets such as property and possessions can be used to pay debts. For private households, merely dismissing debt after a certain period is insufficient. Rather, it is beneficial to analyse the underlying problems and minimise the risk of recurring financial instability. Financial education, debt advice, and social help can be used to manage household expenditures as opposed to filing for bankruptcy, experts suggest.

    At FRP, bankruptcy is considered as a value recovering activity to preserve and enhance the performance of businesses as well as individual finance management. In some circumstances bankruptcy may be the most appropriate solution. According to UK law, an insolvent individual can file for bankruptcy by paying approximately £175 towards court fees as well as £525 to an official receiver. Upon approval by court, individual debts can be absolved or “written off” and creditors are prohibited from contacting the bankrupt individual or taking further legal action to recover owed debts. The result of bankruptcy is to release the individual of the liability to repay the debt.

    As previously mentioned, courts may require the liquidation of assets held by the individual in an effort to pay creditors. An Official Receiver or a licensed insolvency practitioner must be a “trustee in bankruptcy”.  This term refers an entity or individual responsible for administering a bankruptcy estate, which includes gathering the debtor’s assets for liquidation or negotiating between the debtor and creditor.

    There are certain responsibilities and restrictions placed on an individual filing for bankruptcy. Individuals must cooperate fully with an Official Receiver and trustee which include handing over bank or credit cards to the Official Receiver. Additionally, a “non-payment rule” concludes that individuals are not to make payments to creditors with limited exceptions such as debts not listed in the bankruptcy order (i.e. student loans). 

    Filing for bankruptcy also involves the closure of any businesses run by the individual which could incur further debt. It can affect a working situation where being made bankrupt is not allowed in the contract of employment. For example, individuals cannot have a job as a solicitor or a trustee of a charity or role regulated by the Financial Services Authority.

    There are a few options available to UK residents helping prevent individuals from filing for bankruptcy. One such scheme is Individual Voluntary Arrangements (IVA), which is a legally binding agreement drawn between the creditor and debtor agreeing on a monthly payment over a period of five years to pay off debts. An advantage of this is that creditors will not hassle the debtor for payment as an arrangement will have been made.  And according to the agreement, creditors will not be able to charge additional interest on to the outstanding balance. This will aid the individual in paying their debts in full during the term of the IVA. As an IVA needs to be legally binding document outlining the terms of agreement, an insolvency practitioner is needed to carry out this procedure. This insolvency practitioner will draw up the proposal, hold a creditors’ meeting to gain approval and support the individual through the process. Here at FRP, We will assist in formulating an agreement that will be approved by the creditors and dealing with the formalities required.

    Modern bankruptcy laws and “debt restructuring” practices focus mainly on the remodelling the financial and organisational structure of debtors so as to allow the rehabilitation and continuation of their business. For public and private firms in financial distress, “debt restructuring” allows for a renegotiation of delinquent debts in order to improve liquidity and continue operations. For individuals, debt management will provide stability in the form of rescheduling debt. In cases where the amount of debt is relatively modest, this may be the best option.

    Unlike bankruptcy, debt management is not a legally binding scheme for creditors. They may be able to change their mind on the debt consolidation schedule.  Furthermore, unlike IVAs or bankruptcy, debt management schemes may not always be supervised by regulated professionals, so there may be little recourse if things go wrong. However, this unregulated and non-legally binding scheme makes debt management less expensive than filing for bankruptcy.  Restructuring of debt is advantageous in rehabilitating an individual’s financial management. It allows them to pay off debt and restructure their current finances to secure future financial stability.  

     

    If you are still unsure about whether or not your company is in need of a rescue solution; take our ‘Are you a Zombie’ test to find out if you or your business needs assistance.