On the verge of bankruptcy
If you are a business on the verge of bankruptcy, a bankruptcy solicitor advises you on matters involving insolvency. These include winding-up orders, statutory demands, liquidation, receivership, bankruptcy restriction orders, bankruptcy courts and bankruptcy laws.
The issues surrounding bankruptcy can be quite complex if not tackled sooner rather than later. We understand that bankruptcy is a stressful and upsetting process for people to go through. Consultants help you examine issues that can help educate you and /or prepare for the bankruptcy options.
What actually is bankruptcy?
If you are unable to pay your debts to creditors and your expenses outweigh your income, it is likely that you are on the verge of bankruptcy. Bankruptcy is the legal term for this financial status. You can apply for bankruptcy yourself or someone can apply for you on your behalf. If you owe £5000, your creditors can also apply to the courts to make you bankrupt.
What happens if you are declared bankrupt?
When you have been declared bankrupt, your assets will be used by the courts to pay for your debts. This lasts for around 12 months. After this period, most of the debts are cancelled. You will then need to make arrangements to cover the remaining debts after that. With regards to a bank account, most banks will offer you a basic bank account, but you might find it difficult to apply for a personal loan or credit card. You will also need to declare that you have been bankrupt to certain organisations.
Can a company avoid bankruptcy?
Companies that are on the verge of bankruptcy also face the risk of creditors applying to declare the company bankrupt. Instead of the company going into liquidation and closing down, the directors may be able to reach a deal with the creditors so that the company is kept open. They should seek legal advice on this as this is a sensible place to start negotiations in the best interest of the company. Alternatively, the company can appoint an administrator to manage the company’s debts. By appointing an administrator who is an experienced insolvency practitioner, creditors are unable to apply to declare the company bankrupt.
It is wise sooner rather than later to get consultation about the state of your finances and accountants report. Even if you are a small business, it is worth understanding how to protect your company from unnecessary costs of legal action if you are on the verge of bankruptcy.