For those with assets and surplus income, an IVA can be the most appropriate process for all stakeholders because the process is generally cheaper than bankruptcy and maximises the return for creditors, with contributions being made for a longer period. The key is preparing a sensible proposal that is attractive to creditors and offers a real incentive to the debtor to adhere to.
Insolvency numbers likely to rise
So, what does the future hold?
The maelstrom of factors – rising costs, rising interest rates, pressure on companies to cut costs and creditors having a renewed appetite for collection – will all impact the personal insolvency numbers. It therefore appears unavoidable that we will see an increase across all processes.
Moreover, the financial squeeze will impact household incomes, which may then result in the failure of large numbers of income-contribution-based IVAs currently in operation. This may again lead to an increase in bankruptcies and DROs.
If you are carrying unsustainable levels of debt or are being pursued for personal guarantees, what should you do?
The first step is getting good advice sooner rather than later.
Good advice will mean that you will fully understand the range of insolvency procedures available and the right one for your circumstances.
Face into the problem and do not bury your head. Fully document the extent of the problem and consider what assets can be realised to deal with them. Always talk to your creditors, explain you are having difficulties and the steps you are proposing to take to resolve them.
The outcome for debtors is almost always vastly improved if early action is taken by them to present viable and fair solutions to their creditors, as opposed to taking no action or insufficient action, which only places the onus on the debtor’s creditors to provide their own solutions to the problem.
Joanne Wright is a managing director in the restructuring advisory practice of Kroll
