Alternatives to insolvency

We have received this anonymous question for the community:

Are there any better alternatives to insolvency that anyone could suggest?

We have a 6-month old business that is sinking due to cost of living crisis. I am not willing to explore credit options as I can’t see the economy shifting much for a while. My partner and I are directors and I am scared about the impact on us and our house if we go insolvent.

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This is one that I think hits pretty close to home. For reference my dad had this problem when I was younger and we got through okay, so I’ll share the advice I learned at that time for this person and anyone else in the same boat.

Firstly, the biggest problem you’ll likely have this very second is stress. Stress is not good for solving problems or making decisions, so before you read the rest of this please take a moment to breathe and relax, make a cup of tea and try to gather yourself. Some people find physical activity or sport quite calming for this purpose.

Now that you’re in the right state of mind, let’s first focus on solving the practical issue of money.

Begin by seeking out an IVA specialist for advice. An IVA is an Individual Voluntary Agreement, basically an agreement between you as an individual and your debtors to pay off as much debt as you reasonably can to avoid you going bankrupt (as then they won’t get any more money from you).

Typically you would pay some percentage less than you owe, say 80%, so you benefit from it; but because you don’t go bankrupt or do a runner the debtors have a strong guarantee of repayment, so they benefit. At the end the remaining debt is written off and you don’t have to make the regular monthly payments anymore.

You will also be legally protected from harassing calls and letters about debt, as well as often having protection for your home, and it won’t necessarily be required that you disclose this to future employers or lenders (though I’d recommend you speak to a specialist on that front). This makes the insolvency much less hostile and can really ease stress. An IVA specialist will be able to tell you more specific information about your case.

Secondly you should, if you haven’t already, inform your spouse or partner as well as any children or other dependents that you might have. It’s often tempting to hide these sorts of things and try and fix it without anyone finding out, but it never works out that way and the deception can break families apart.

Honesty is the best policy, and people will understand that you had a rough go of it and you tried your best to keep the business afloat. If you can present some sort of agreement or plan to deal with the debt like an IVA that can really assure people that the sky isn’t falling down.

Thirdly I would suggest you prepare for a decrease in household spending, with an eye to limiting luxuries for the foreseeable future. Most IVA agreements run for about 5 years, so this is not a short process. This may be difficult, but it helps to make a show of good faith by being the first one to offer things you primarily spend money on to be given up.

I know given our current cost of living crisis that’s easier said than done (we had ours during the Great Recession) so I’d also suggest seeking support such as family and friends or other avenues such as food banks or community programs for struggling people. There’s no shame in needing a little help during a tough time, that’s part of being human.

Ultimately the process will not be easy or pleasant. It certainly wasn’t for my family. But that doesn’t mean it’s not manageable. You will get through this, even if it will be hard for a while, and if you do your best the people you care about will support you through it.

I hope that helps and if you want to talk about it with someone who knows what it’s like do get in contact with me. Good luck.


As well as echo’ing Ben’s advocaction for IVAs, there’s a few other things from this query that may be worth exploring:

  1. if it’s a ltd company, then any debts are in the company’s name, not the Directors - the company could choose to voluntarily wind itself up (giving notice to suppliers, etc). If none of them object within a given time, then they’re essentially saying “that’s fine - we won’t chase you for anything” and you can file the necessary forms with companies house and hmrc.

  2. your house is only at risk in a very limited number of scenarios:
    a - the company borrowed money, and you agreed to offer personal guarantees to the loan;
    b - anyone the company owes money to at the point of it giving notice of intending to wind up disagrees: but they’d have to appoint an administrator to get their money out of you. Given that this would cost them an upfront fee of several thousands of pounds, you can probably make an informed choice as to the likelihood of if they’d choose to do this. In such an instance, Directors would only become personally liable if the administrator could show that they knowingly acted either fraudulently or negligently (i.e. allowed bills to pile up when they knew that there was no future in which the company would ever be able to pay them).

But as the company is so young (less than 6 months), unless the Directors took out large loans to set it up, or opened extensive lines of credit with suppliers, it’s hard to see from this summary that there’s anything be realistically be to concerned about (assuming that the Directors lead and manage this process proactively).

For context, I advise various charities, CICs, co-ops, and other businesses about their options when it looks like they can’t see how they can possibly continue - from rescue, rebirth, regeneration, and dignified winding up.
Always happy to offer an initial conversation without cost, charge, expectation, or obligation.

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Ben and Adrian have given some great pointers above, but I just wanted to say - solidarity. That is a really hard position to be in, but I want to reassure you that you aren’t the first, nor will you be the last, people to be in this particular situation. People have walked the road ahead of you, and there is a wealth of support out there. Stay well in the midst of the stressful situation.

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That sounds so awful and I hope the original asker of the question is getting lots of support at home. I can only imagine how stressful that must be!