Individuals

A Voluntary Arrangement is a simple and relatively inexpensive solution for those in debt. Anyone unable to pay off debts as they fall due can seek a Voluntary Arrangement even though there may be sufficient assets to cover the debts. (Any person already subject to a bankruptcy order can also apply and, if successful, obtain an annulment).

A non-bankrupt person can apply to the court for an interim order. If granted, the order will legally suspend any creditors’ proceedings for recovery of debts owing.

A licensed insolvency practitioner must be nominated to act as ‘Nominee’.

When the insolvency practitioner’s report is received, the court may order a creditors’ meeting to be convened.

The debtor’s proposal may be modified at any time either before or at the creditors’ meeting. If the creditors agree to the proposal then the appointed practitioner will report to the court and the Arrangement becomes effective. The proposal must be approved by 75%, by value, of creditors present or voting at the meeting. Any party can appeal within 28 days on the grounds that the proposal unfairly prejudices a creditor. The court has the right to revoke approval or reconvene the meeting.

The key advantages of a Voluntary Arrangement are:
  • There is normally a better return to creditors than bankruptcy
  • The trauma of bankruptcy is avoided
  • There are no bankruptcy restrictions
  • The debtor is not forced to resign directorships
  • There is flexibility with scope for negotiation
  • The cost of administering a Voluntary Arrangement is normally less than the cost of bankruptcy,
  • Costs are generally met out of realisable assets
  • The debtor can make repayments from earnings over an extended period
  • The performance of the scheme may be underwritten by the guarantee of a third party

Bankruptcy

What is bankruptcy?

Bankruptcy is a way of dealing with debts that you cannot pay.  Whilst you are bankrupt any assets that you have might be used to pay off your debts.  After a period of time (usually one year) most of your outstanding debts are written off and you can make a fresh start. This is known as discharge from bankruptcy. The effects of going bankrupt are the same whether you file your own petition or are made bankrupt by your creditors. Further information can be obtained form the Insolvency Service website at www.gov.uk/bankruptcy.