Insolvency is the state of not being able to pay on your financial obligations on time or at all. In other words, when your debts are greater than your assets, you may become insolvent. If you find yourself in this situation, you need to act soon; however, do not proceed without insolvency advice from a qualified debt adviser or insolvency practitioner.
There are websites published by the government with good insolvency advice (insolvency.gov.uk), as well as a site published by the Insolvency Practitioner Association (insolvency-practitioners.org.uk). Here, you will find the basics of insolvency and your options, in addition to what to look for when seeking further insolvency advice.
First of all, you will want to find an authorised insolvency practitioner (IP) who can give you face to face insolvency advice. Before arranging that meeting, however, you will want to ask about any consultation fee. Get this amount in writing.
Filing insolvency and then agreeing on bankruptcy or an individual voluntary agreement (IVA) all ironically cost money. Considering your situation, you will want to be very clear on how much everything costs and how to come up with the funds to pay for it.
The insolvency advice given to you by your licensed IP should include an overall assessment of your financial situation, thorough education on the options available to you, and suggestions as to the best personal route to take. The insolvency advice should include the good and the bad news, as much as you don't really want to hear the bad news.
As for the bad news regarding insolvency advice, you should be prepared to hear about the lifestyle changes that you need to make in order for a financial solution like an IVA, to work. Some things you'll need to consider include the length of the agreement (generally around 5 years), the consequences of not staying current if an IVA is filed, and all of the costs involved. Ask for statistics about insolvency in general, as well as personal success data from prior clients of your IP.
There is some good news to be had regarding insolvency, which is that with determination, it can be a means to the end of unsecured debt. The process of becoming more debt free is not without long-terms effects though.
Be sure to ask for insolvency advice regarding how filing an IVA or bankruptcy is going to affect your credit history, and ask what you can begin doing now to improve your rating. In short, be wary from where you get insolvency advice, get as much information as you can about the process, and demand that more than one option be given to you.