Going bankrupt is up there with one of life’s most stressful events. It may be that you had a great business idea, but for various reasons, your business didn’t work. Or like many others in recent months, your business has faced economic ruin due to the restrictions imposed upon us. It could be that your debts have built up because of lack of income or furloughed during the pandemic. Whatever the cause, there is a way out, and there are procedures in place if you find yourself in financial hardship. So what can you do, and what help is available?
If your financial or debt issues are recent and not yet considered out of control, there are services available online such as credit counseling services that can offer advice and help. They will go through your financial details and identify ways to cut down on spending or reducing monthly outgoings to free up funds. They can help you create a financial plan and budget to help you see a clear path out of your predicament. They may also suggest shifting around your debts onto cards with a lower interest rate. They deal only with personal obligations, not business ones.
If you have already analyzed your situation and find that you have more money going out than coming in with little hope of imminent change, it may be time to consider bankruptcy. Going bankrupt may seem like a severe step, but sometimes it is the only way out of serious financial hardship. What different types of bankruptcy options are there?
Liquidation is the most common bankruptcy option. It means that the company ceases to exist, and any assets are used to pay off creditors. A liquidator is appointed, and all business affairs are handed over to him.
If you live in a mortgaged home, you may be forced to sell it, and release the equity to pay off creditors. This process may take years, so you have time to make alternative arrangements.
Using a reputable company will ensure that the process is as smooth as possible. The guys over at https://www.amourgis.com/ understand the importance of professional and friendly representation during this time of crisis. If you are in the process of losing your financial assets, you will understandably be in turmoil. Using a trusted company and personal research will help you feel more in control and reassured you are taking the right steps.
Voluntary bankruptcy is when it is clear you cannot pay your creditors. There are many guides available online so ensure you understand the process.
Forced bankruptcy is when you owe £5000 or more that you can’t pay. Your creditors will often instigate this and will usually take legal proceedings to enforce it.
Business Repayment Plan
A small business repayment plan may be a good alternative to liquidation if you are a sole trader or only have a few employees. A BRP is a less extreme option than liquidation and is arranged based on how much is earnt, and what needs to be repaid. It also means assets like your home are protected.
Reorganizing your business is a great option if you feel there is still hope. It’s like one last-ditch effort to save your business. A complete restructure sometimes helps to identify areas to improve efficiency and profit. During the restructure, you protect yourself from creditors whilst trying to rebuild your business. It offers flexibility and time to make necessary changes.
Using a corporate Accountant during the restructuring phase is invaluable as they are professionally trained to recognize ways to maximize profits, reduce spending and make permanent cuts.
Larger corporate companies struggling to make a profit and pay debts can go ‘into administration’ to allow breathing space; this can be an enforced procedure or voluntary. Similar to business reorganization, this allows some time to restructure in an attempt to save the company. An Administrator is appointed to oversee the process and ultimately decides if the business has a chance of success in the future. The Administrator has a finite amount of time to write to all creditors with proposals for repayment and all the details that led up to the administration. They will also inform them of the most likely anticipated outcome.
Losing your business is a demoralizing experience, especially if you’ve spent years building it up. However, sometimes we can’t control or avoid the factors that contribute to economic decline. The consequences of the global pandemic have destroyed many businesses. Bankruptcy is not the end of the world, and you may find that when the process is over, you feel a considerable weight has lifted from your shoulders. Do not fear, happier times are ahead, and maybe a new start is just what you need.