Bankruptcy information

 

A bankrupt is a person who has become, or will become, unable to pay their debts. Although the term bankruptcy refers to an individual, it is often the case that the individual becomes bankrupt through the course of a failing business.

If you are facing bankruptcy or are already bankrupt and need to know what your legal liabilities are, we can help.

Owing company debt

In company law, the concept of limited liability applies to ensure that the debts of the business do not become the debts of a director. However, if a creditor perceives the risk to be too high they may not agree to lend money to a company, but will ask a director to personally guarantee a debt.

If the bankrupt is a sole trader, or part of a partnership, the failing business will then draw on the director’s personal assets to pay the debts of the business and as a result the individual may become bankrupt.

Alternatives to bankruptcy

An insolvency solicitor will be able to offer information on bankruptcy that may help you if you cannot pay your debts.

For example, bankruptcy is not the only option for an individual unable to pay their debts. An insolvency expert will be able to look at the debtor’s position and discuss repayment options with creditors.

Creditors may agree that it is better to have a longer payment period, or receive a reduced sum, than it is to allow the individual to become bankrupt, where they may get less, or none, of their debt repaid. These types of arrangements are known as Individual Voluntary Arrangements or IVAs. Visit our information page for detailed information on IVAs.

Problems post-bankruptcy

Sometimes the courts can impose further restrictions on the bankrupt which last longer than the bankruptcy itself. These are known as bankruptcy restriction orders, and are important to be aware of.

If you are having debt or bankruptcy issues, Contact Law can put you in touch with a specialist insolvency solicitor to arrange the best course of action for you. The solicitor we recommend will help put you back in your best financial position. Please call us on 0800 1777 162 or complete the web-form above.

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