Although you may be deep in debt it may be possible to avoid bankruptcy (or liquidation if you are a partnership or company) if you have a viable business or assets to sell. However, in some cases, going bankrupt may be the best option just to give you a clear start. Bankruptcy only applies to individuals, sole traders and partners in a business, not the business entity itself.
Bankruptcy Trigger Points
There are usually a handful of trigger points that make a business realise it is in trouble. These are:
- Being unable to pay the employees
- The bank calls in its loans or overdrafts
- A bailiff calls and ceases goods (or)
- HM Revenue and Customs start bankruptcy proceedings
There are others trigger points as well such as a review of your monthly accounts with your accountant.
What are my options if my business is bankrupt?
When your back is against the wall (with debts) the first decision to be made is whether or not the business could be viable in the future?
If not viable then the usual solution is bankruptcy or liquidation. In both cases, it will be worth talking to a licensed insolvency practitioner first to make sure that you are choosing the right option for you and to understand any potential downsides – for example, losing your home, the effect on your credit rating or the implications of any guaranteed debts.