Bankruptcy is a word that will make any business owner shudder and it is certainly something that you will want to avoid if possible by keeping on top of your debts. Many businesses run into financial difficulties and have to declare bankruptcy, but you should know that this is not your only option when you are having troubles with debt and you should always weigh up your options. Keep reading to discover the alternatives to bankruptcy that should be considered.
Debt Relief Orders
Debt relief orders (DRO) last for a year and prevent creditors from taking action to recover their money without permission from the courts. After this period, if your situation has not changed then you will be freed from your debts. You can apply for a DRO if you owe less than £20,000, you have assets worth less than £1,000 and have less than £50 per month disposable income after normal living expenses.
Informal Arrangements
Another option that is always worth trying is trying to come to an informal arrangement or ‘family arrangement’ with your creditors. You should write to them as soon as you are starting having difficulties repaying and try to see if you can create some kind of comprises and timetable for repayments. Often, creditors will have some flexibility but keep in mind that this will not be legally binding.
Individual Voluntary Arrangements
Individual voluntary arrangements (IVA) are similar to the above but a formal, legally binding version. It starts with a formal proposal to creditors to pay part or all of your debts and there is a requirement for an insolvency practitioner’s report to the High Court. This means that you should seek the services of restructuring and insolvency specialists that will be able to guide you through the process.
Administration Orders
If a creditor gets a county court to rule against you, you might have an administration order declared against you and you will make regular payments to the Enforcement of Judgements Office (EJO) to pay towards your creditors. You can also choose this as an alternative to bankruptcy by filling out an n92 form. You will only be able to enter administration if your debts are below £5,000 and you will have to provide proof that your income is fixed and stable enough to make the payments each month.
As you can see, there are alternatives to bankruptcy and it is worth exploring your options if you are having difficulties with your debt. This is a situation that is not uncommon but can be very serious, so you should always speak with a specialist to determine what the best course of action is for your specific situation. This will help you to take the right action and get back on your feet sooner rather than later.
