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Informal Procedures and Other Options to Bankruptcy

Personal insolvency is defined as an inability to pay debts as they fall due and there are a number of informal options for the individual all of which avoid the stigma, obligations and restriction of bankruptcy.


Re-mortgaging is an option to realise equity in the individual's property in order to their settle debts. A mortgage has lower interest than other debts and can be arranged over a longer term, reducing monthly payments. Equity release schemes are also available and details of providers can be obtained on request. However, re-mortgaging will convert an unsecured debt into a secured debt which, in the event of a future bankruptcy, would not qualify for debt forgiveness.

Refinance / Consolidation of Debts

This is an appropriate procedure for an individual who has a number of loans and will leave them with one monthly payment. It should be remembered, however that a high interest rate will be suffered and the debt will be repaid over a significant period of time.

Informal Settlement of Debts

This will require the individual to be pro-active with his creditors to arrange a schedule of repayment of his debts. It avoids the restrictions imposed by bankruptcy and is inexpensive; however, with no formal procedure the settlements are not legally binding on creditors who may, at any time, take recovery action for repayment of the debt. Alternatively the creditors may agree to a full and final settlement of the debt.

Debt Management Plan

A debt management company will negotiate a reduced monthly payment to creditors. The individual makes one monthly payment to the debt management company, who in turn, draw their fee and pay creditors a pro-rated amount. The debt management company may be able to negotiate the freezing of interest but, with no debt forgiveness, the debts will have to be repaid in full.

Alison and Ruth both provide pragmatic and commercial solutions to businesses and individuals facing financial difficulties. Their approach not only ensures the strongest chance of financial survival but also the interests of creditors. I would confidently recommend them to anyone in need of their sNev Catton (Solicitor )

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