Insolvency means that you cannot pay your bills and other financial obligations in a timely manner. In other words, your debts exceed your assets. Thus, insolvency is a state; whereas bankruptcy, with which insolvency is often confused, is a legal matter. Now, insolvency may lead to bankruptcy, but not necessarily. In fact, Insolvency.gov.uk reported that in the third quarter of 2007, only 15,833 insolvencies became bankruptcies, whereas 10,239 of those insolvencies ended up as an individual voluntary arrangement (IVA).
If you want insolvency help, you will need to contact an insolvency practitioner (IP), a licensed individual able to assess your current situation, inform you of your options, advise you on the best personal choice, and organise any necessary proceedings. A good place to begin looking for insolvency help is the Insolvency Service?s IP Database or the Insolvency Practitioners Association (IPA).
Most likely the IP will offer you two main insolvency help choices: an IVA or a bankruptcy. The IVA is often a more palatable form of insolvency help to those in financial troubles because it is a private agreement (Bankruptcies can be reported in local media and must be reported to employers.), because it less adversely affects your future credit, and because your lifestyle will not have to change as dramatically. To be eligible for insolvency help via IVA, 75 per cent of your (unsecured) creditors must agree to the repayment schedule that is proposed. Once the necessary amount of creditors agrees, your IP will work out with you exactly how much you can pay per month for the next, in general, five years. Once this schedule is worked out with you, your IP then works on behalf of your creditors to ensure your repayment.
In researching and being advised on insolvency help, you may decide upon filing for bankruptcy. This much more public (unsecured) debt resolution usually takes up to a year, but the proceedings may last longer. In this process, most of your assets will be sold in order to settle on as much of your debt as possible.
Insolvency help is widely available. Remember, however, that insolvency help is not free of charge. You are hiring someone to act on your behalf and the that person will most likely charge fees.