Bankruptcy and insolvency claims
Bankruptcy involves the liquidation of various assets, including your home, car, income, shares, rights of action, and non-essential items, to settle outstanding debts. Once a bankruptcy order is issued, the official receiver or trustee assumes control of your assets, aiming to realise their value for distribution among creditors. Insolvency is effectively the same thing as bankruptcy, but the term “insolvency” usually applies to businesses rather than individuals.
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In addition to aiding debtors, our legal experts recommend that any non-bankrupt spouse seeks legal counsel due to significant implications when assets are jointly owned. We provide guidance on effectively managing such assets and minimising potential claims by a trustee.
Bankruptcy carries profound consequences and should be contemplated only after seeking professional advice.
Please reach out to us for assistance and advice on alternative options that may be available to you, potentially averting bankruptcy. You can contact us at 01273 696962 or complete our online enquiry form, and a team member will promptly reach out to you.
Our specialist bankruptcy solicitors can advise you on the following:
- Personal bankruptcy procedure and implications
- Corporate insolvency procedure and implications
- Claims arising on either a bankruptcy or insolvency
- Alternatives to bankruptcy and insolvency
Bankruptcy is a legal process where individuals are declared unable to repay debts, leading to the liquidation of assets to settle with creditors. Insolvency, however, is a broader financial state where a person or business cannot meet its financial obligations. While bankruptcy applies to individuals, insolvency is commonly used for businesses that may enter administration or liquidation.
Filing for bankruptcy significantly impacts your credit rating, making it difficult to obtain loans, mortgages, or credit for up to six years. Credit reference agencies, such as Experian, Equifax, and TransUnion, record bankruptcy, which may also affect employment opportunities in financial and legal sectors.
Certain assets are exempt from liquidation in the UK, including:
- Essential household items (e.g. clothing, furniture, and appliances).
- Tools or equipment necessary for your profession.
- A modest vehicle if required for work or essential transport.
However, luxury items, additional properties, and high-value vehicles may be sold to repay creditors.
Businesses do not go bankrupt; instead, they become insolvent. Insolvent companies may enter:
- Administration – A temporary process to restructure and avoid liquidation.
- Creditors’ Voluntary Liquidation (CVL) – Directors voluntarily close the company due to insolvency.
- Compulsory Liquidation – A court orders the business to close and assets are sold to repay creditors.
Instead of bankruptcy, individuals and businesses may consider:
- Individual Voluntary Arrangements (IVA) – A legally binding repayment plan agreed with creditors.
- Debt Relief Orders (DROs) – Suitable for individuals with low income and few assets.
- Company Voluntary Arrangements (CVA) – Businesses negotiate reduced debt repayments to continue trading.
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