Alternatives To Bankruptcy

Before undertaking the bankruptcy procedure, it is important that companies or individuals consider other options that may be available

. Taking an alternative option is particularly vital to companies as it may help to save the business. If a company or individual is not too severely in debt, then they may be able to pay off debts at their own pace, depending on the procedure that is undertaken.

One alternative option is an informal arrangement. An informal arrangement between those in debt and their creditors will enable debts to be paid off at a more comfortable pace. Businesses that choose this option will be able to continue trading whilst paying off debts. In order for this arrangement to work, the creditors must accept the payment plans presented by the company directors or individuals.

Another option is a voluntary arrangement. For companies, this will be a Company Voluntary Arrangement (CVA). An insolvency practitioner will need to be involved in the process to make sure that the payment plan, if accepted by the creditor, is followed. Company directors must stick to the payment plan that was originally presented to the creditors. For individuals, the process is known as an Individual Voluntary Arrangement (IVA) and is the same as with companies. Voluntary arrangements usually last between three and five years.

Companies and individuals can also go through a procedure known as Administration. This process usually takes place when an individual or company owes less than 5,000 to more than one creditor. A court will monitor the procedure, along with an insolvency practitioner.

Before undertaking an alternative procedure to bankruptcy, it is important that individuals and companies seek advice from a financial advisor. Companies often attempt to enter these procedures when too severely in debt, which can lead to further problems. A financial advisor will be able to suggest which options are best for a company or individual in debt.

by: Ashlyn Henry

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