The Need For Insolvency Practitioners

Insolvency is when you are incapable of paying your debts. It is usually used in reference to a business having this problem. There are two types of business insolvency:

Cash flow insolvency: Unable to pay debts as they come due.
Balance Sheet insolvency: Having negative net assets--liabilities exceed assets.

What Is An Insolvency Practitioner?

Insolvency practitioners operate mainly in the United Kingdom with a few other Countries such as Wales and Scotland also using them. An insolvency practitioner must be appointed by the Secretary of State or a recognized professional body. An insolvency practitoner is a person who is authorized and has the necessary security to practice in insolvency cases They are appointed to a case as a result of a meeting of creditors or by the Secretary of State if the official receiver sends an application. The insolvency practitioner becomes responsible for the case on the date that the appointment becomes effective. The official receiver should try to hand over the case as soon as possible. Preferably on the same day of the meeting or date of appointment.

What Types Of Insolvency Cases Does One Need An Insolvency Practitioner For?

There are several types of formal insolvency procedures that must be dealt with by an insolvency practitioner. They are: Bankruptcy, liquidations, company voluntary arrangements, individual voluntary arrangements, deeds of arrangement, administrations, and administrative receivership. In Scotland, Trust deeds are also handled by the insolvency practitioner. Companies, creditors, and individuals all must use professional, authorized insolvency practitioners to deal with all of these different cases.

What Do These Procedures Mean?

Bankruptcy and liquidations are the two most common procedures handled by the insolvency practitioner. Bankruptcy is when a company or individual legally declares the inability to pay its creditors. Liquidations is when a company can no longer pay its creditors, the company is brought to an end. The property and assets are redistributed and the proceeds from the redistribution goes to pay the creditors. Before doing either of these one should consult with a licensed insolvency practitioner to see if there is another route to go.

What If There Is A Problem With The Insolvency Practitioner?

If a problem arises with the insolvency practitioner and the company cannot resolve it themselves, then the company can contact the administrative receiver to see if they are able to resolve the problem. If the problem remains unresolved, the company can lodge a complaint with the Secretary of State.