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Bankruptcy
Individuals, including Sole Traders can enter into Bankruptcy. It’s a word often misused by people to describe business failure, although it is not an option for a Limited Liability Company. A relevant solution to close a Limited Liability Company would be voluntary liquidation, either a Members Voluntary Liquidation or a Creditors Voluntary Liquidation depending on whether the company is solvent or not. Bankruptcy should be a last resort but some people can view it as ‘an easy way out’.
The UK Government significantly relaxed the rules regarding Bankruptcy under the Enterprise Act 2002. A sole trader who has a failed business can now file for Bankruptcy and be discharged within 12 months. Prior to this, a bankrupt could not be discharged until 3 years had passed. It’s now possible to obtain mortgages and credit for discharged bankrupts, so this process can be better for your personal future rather than trying to go on with a business by ‘trading through’ and prolonging the pain.
Bankruptcy Process
Bankruptcy can be initiated in three different ways:
- A Creditor’s Bankruptcy Petition to the court.
- A Debtor’s Bankruptcy Petition to the court.
- The supervisor of an Individual Voluntary Arrangement petitions for Bankruptcy to the court.
It may be that your business is viable and you simply need time to pay. In this case, we may be able to help you with an Individual Voluntary Arrangement so contact us today to see how. Call: 08000 842 844.
Being Discharged From Bankruptcy
A bankrupt is no longer bound by the restrictions places upon them by the Bankruptcy order when they are discharged.
This releases the bankrupt from their debts and it means they can start to rebuild their credit once more. Some debts such as government fines, however, will remain. Debts to the Inland Revenue, VAT and other trade creditors in the period leading up to the Bankruptcy are written off, typically 12 months after the bankruptcy order has been processed.
You should only consider Bankruptcy where all other solutions have been addressed. For more free advice on Bankruptcy or to discuss your situation, please call us on 08000 842 844.
