What Is Insolvency?

When an individual or a business is considering a voluntary arrangement, they must consult with an insolvency practitioner (IP). The IP is a person that is licensed, thoroughly schooled, and authorised to act on the behalf of an insolvent individual or business. Quite often, IPs are accountants who have passed the Joint Insolvency Examination Board's exams (JIEB exams) and are eligible to be licensed by a recognised professional body. All voluntary arrangements for individuals or businesses must be setup by an insolvency practitioner.

What Is Insolvency?

Insolvency is defined as the inability to repay your debts "as and when they fall due." People often find they are insolvent after the loss of a job or a lengthy illness. Businesses may become insolvent after a downward turn in the economy.

What Does An Insolvency Practitioner Do?

When an individual or a business is found to be in a difficult financial situation and is insolvent or facing possible insolvency in the near future, an IP may be appointed in order to make an attempt at rescuing the situation. In some instances, a voluntary arrangement may be setup by an IP in an attempt to get past debts paid and avoid a bankruptcy. In many instances it is not possible for the IP to rescue the individual or business from insolvency, and the IP must follow through with other steps.

The insolvency practitioner must realise the assets of the insolvent party in order to raise funds to be paid to creditors.

The insolvency practitioner is responsible for collecting any monies owed to the insolvent party.

The insolvency practitioner must examine the claims of creditors against the insolvent party and agree they are justified.

The insolvency practitioner is responsible for the distribution of all monies collected from realisation and collections after any costs related to the realisation process are paid.


How Do Insolvency Practitioners Find Their Clients?

Quite often an individual will contact an IP directly to discuss their financial problems and ask for help. In the case of a business, the board of directors of a large company or the owner of a small business may make direct contact with an IP.

Other parties that may contact an IP include the Official Government receiver, third party creditors attempting to retrieve debt owed them, an accountant on behalf of a client, as well as any individual or business that has a financial interest in the insolvency matter. Generally a meeting is held with the individual or business facing insolvency, the IP, and the creditors.

What Can Be Expected At The Meeting?

Prior to the meeting the IP will have gone over all the information available pertaining to the financial state of the business or individual. At the meeting the IP will describe the situation to all parties present and explain the level of insolvency that has been established as well as any special circumstances relating to the specific case. All available options will be explained and examined, and a course of action will be recommended by the IP. When there are practical alternatives to an insolvency procedure, they may be the solution recommended.
 
Why Should An IP Be Used?

An insolvency practitioner is well acquainted with the knowledge of insolvency laws and has broad accountancy skills as well. The IP is familiar with a broad range of insolvency cases in both industry and personal circumstances. IPs come under government regulation and require licensing. They are trained to provide the most accurate and appropriate advice for each individual circumstance.

What Other Services Do IPs Provide?

Some businesses consider an insolvency practitioner to be a "company doctor" who can recognize the symptoms of a potential financial problem. Because of their training, IPs posses a great deal of knowledge including debt restructuring, and they are able to advise businesses of situations that may indicate a threat of insolvency in the near future. This allows a business to put safety measures in place immediately to avoid going into an insolvent condition. IPs can also help individuals who are concerned their finances are getting out of control and advise them on the correct financial path to follow to regain control.
 
Any individual or business facing a financial crisis may avail themselves of the services provided by an insolvency practitioner. They can assist with a voluntary arrangement, or possibly advise you how to handle your situation in a way that can prevent the necessity of setting up a VA or a bankruptcy. If you have financial concerns, an insolvency practitioner may provide the answers you need.

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