Insolvency/ Business Recovery

What is Insolvency?


Insolvency occurs when a person/ Company cannot may the required debt payments when due. This often results in the liquidation of the debtor's assets in order to make the required payments.

There are many reasons why a person or a Company may become insolvent, and not all of them are self inflicted. Insolvency may occur due to the loss of business from a major customer. This may impact cash flow today, as invoiced work may not be paid for. It may also affect cash flow into the future as the loss of a major customer will reduce cash flow into the future, unless new business is found elsewhere.

Another cause of insolvency could be the unexpected reclaiming of debt from a creditor. For example, your bank may suddenly require you to pay back your overdraft. Without the immediate cash to hand this may lead to financial difficulties.

Damage to stock or to property may result in short term difficulties for a person or a Company to generate the cash in order to meet it's financial responsibilities.

How to get out of insolvency?


Many companies specialise in aiding people or businesses who may have found themselves in insolvency.

Business recovery from Wilson Field is an example of one such route out of insolvency. The solution to insolvency may come in many forms. The form depends on the individual situation that the insolvent person/ Company is in.

Liquidation
This is normally the last course of action and it involves selling your assets in order to meet the debt payments.

Turnaround Services
This involves a Debt Recovery firm assisting a person/ Company in their business affairs in order to generate the cash flow to meet the debt payments. Companies that offer advice such as this may be the crucial and impartial third party opinion required to save the Company.

Administration
This involves putting together a recovery plan in order to save the business as best as possible, preserving the most assets as possible, whilst meeting debt repayments.

Company Voluntary Arrangement
This is a means by which a Company can be rescued via a restructuring strategy. A business recovery Company will ease creditor pressure by communicating on your behalf and negotiate smaller and more affordable monthly debt repayments. They can even negotiate with HMRC on your behalf to ease pressure from the Tax Authorities whilst you get your "house" in order.

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5 comments

The Wallet Doctor said...

What is the difference with Insolvency and going bankrupt? Is bankruptcy just one solution which you didn't cover? What do the consequences of bankruptcy look like for a business.

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Brenda Palmeri said...

The company can choose to make payment plans in writing, to the creditors and try to come to some sort of mutual agreement before the issue gets to the courts.Liquidation

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