What are my Insolvency Options?
Many Australian businesses continue to face financial hardship after the Global Financial Crisis. Many businesses don’t ask for help at the right time, or they don’t receive the right assistance. For those who are looking to get out of their debts and opt for bankruptcy, the specialists at ISA are offering the following options for insolvency for all business owners.
1. Voluntary Business Administration
Business administration is the most appropriate step for a business to first consider when they are insolvent or likely to be insolvent, as it is provides the opportunity to restructure the business and/or settle its debts, without affecting the ability of the business to trade in the future, unlike liquidation or bankruptcy. An external administrator is appointed to the business, and is in charge of investigating the company’s affairs, reporting to creditors and assist in determining whether what action the company must take to rectify its debts.
2. Debt Agreement
By establishing a debt agreement, you are entering a legal contract with creditors which cannot be overturned. Debt Agreements are available for those who meet the criteria and are unable to pay the full amount of their debts. A lesser amount is compromised with creditors, and a regular payment (weekly, fortnightly, or monthly) is made to an administrator who then manages your debts until the agreement is complete. However, a debt agreement is not to be taken lightly. It is a serious step that may have long-term consequences on your career and ability to source finance. To find out if you are eligible for a debt agreement, contact ISA.
If a business chooses to liquidate, they are agreeing to the cessation of its operations and the sale of its assets to pay outstanding debts to creditors. This is one of the final options a business should consider, as the business will be terminated and cease to exist following the completion of the liquidation process.
4. Declaring Bankruptcy
Bankruptcy should always be considered as the last resort and we strongly recommend that you explore all other options before reaching the decision to file for bankruptcy. Once your company is officially and legally declared bankrupt, your company will be closed for the duration of the three year bankruptcy period, after which you will be released of your outstanding debts. However, like entering a debt agreement, this decision may affect the course of your career and taint your credit history.