If you’re unable to pay your outstanding debts, filing a petition for insolvency may be a way to help you get back on track before it becomes necessary to file for bankruptcy. It involves a process in which the insolvent party files a ‘notice of intention’ with an Official Receiver, along with cash flow statements and any other information relevant to the stated intention of getting your debt-to-income balance back under control. It is not a simple undertaking, which is why it would be perfectly prudent to seek the advice of a litigation lawyer or other objective third party who can help navigate you from where you are now financially to where you want to be.
What is the Difference Between Insolvency and Bankruptcy?
Many people are familiar with the process of filing for bankruptcy, which entails an individual or business being granted protection as their assets are liquidated for the purpose of resolving any and all outstanding debts. Insolvency, on the other hand, is simply the state of being ‘insolvent,’ or having more outstanding debt than the party in question can reasonably pay back based on their current income. Filing for an insolvency petition can give an insolvent individual different options in a final bid to avoid bankruptcy. Some of those options may entail protection from debt collectors or even debt consolidation.
What Are Some Reasons Someone May Have For Filing an Insolvency Petition?
It may feel like there is a stigma attached to filing for insolvency, but it is simply a realistic statement of current financial status and not necessarily an indictment on an individual’s character or value as a person. Any number of unexpected external factors may cause an individual’s overall debt to outmatch their income. For example, a divorce in which someone finds themselves making payments to support their children or former spouse via monthly payments can detract from the individual’s net income. An individual may become ill, causing a pause in income or a new set of expenditures to account for. Job loss is another potential setback that may take a toll on someone’s balance sheet. In short, life happens, but that does not have to mean you are left to tread water on your own with no help or support.
Should I Contact a Litigation Lawyer Before Filing an Insolvency Petition?
In any situation where you are filing a legal petition that can have a profound effect on your personal or business-related finances, you should consult someone with knowledge of the process in order to responsibly weigh the pros and cons of moving forward. A litigation lawyer can look over your debts, income, and assets and give you an idea of what to expect and what to avoid as you begin the process of moving back toward financial security and stability.