Overview
Just as the directors of a company need to be able to recognise when a company is in financial difficulty, individuals need to be able to do the same.
The indicators of an individual in financial difficulty are largely the same as those for a company. An individual faces similar choices to those faced by company directors when deciding what to do when financial difficulties arise.
An individual can:
- Do nothing and hope that his/her financial circumstances will improve or the creditors will be accommodating or docile.
- Do a deal with some or all of his/her creditors.
- Declare him or herself bankrupt.
As for corporate insolvency, personal insolvency can lead to collective procedures (involving all creditors) and enforcement procedures (usually led by one or more secured creditors). Examples of collective procedures are bankruptcy (which is broadly the equivalent of liquidations for companies) and an individual voluntary arrangement (“IVA”) (which is broadly similar to a CVA) and an example of an enforcement procedure would be a secured creditor enforcing a charge or mortgage over the bankrupt’s assets by appointing a receiver.