IVA or Bankruptcy? Insolvent Professional (Pt.1)
This is the first in a series of articles which will look at the effects on the career of a professional who becomes insolvent. It will compare the effects of two of the principal remedies available to such a professional i.e. Bankruptcy and Individual Voluntary Arrangement.
Financial problems beset people in all walks of life. Just because somebody has a desirable or esteemed profession does not bestow immunity from getting heavily into debt. Professional people are often the envy of society because of their perceived high income. High income can lead to high lifestyle and a sudden change in earning capacity or in other family circumstances can cause even a pillar of society to falter in meeting financial obligations.
The consequences of insolvency can be devastating for a professional, particularly if an inferior financial solution is chosen. The big question for an insolvent professional is whether to enter into an Individual Voluntary Arrangement (IVA) or to petition for Bankruptcy (BCY) if all other possible remedies have been exhausted. Such other remedies might include obtaining financial assistance from a relative with means or a enjoying a windfall such as a substantial inheritance or winning the lottery. In the absence of such good fortune, a professional should consult with an Insolvency Practitioner without delay so that the alternatives of IVA or BCY can be considered.
Many of the professions have their own recognized professional body (RPB) without whose authorization, the professional may not practice. Authorization may consist of holding a current licence or other necessary accreditation. If the RPB expels the professional or refuses to issue a licence to practice or such accreditation as is necessary, the professional may suffer a serious reduction in income if unable to practice.
Professionals who opt for BCY generally face more serious sanctions from their RPB than they would face if they chose to offer an IVA to their creditors. If you are a professional and insolvent, your IP should be able to tell you what sanctions apply to you both in BCY and in an IVA. Some sanctions may be mandatory and some may be at the discretion of your RPB. There is a surprisingly wide variation in the sanctions, depending on the RPB of which you are a member. Your RPB will generally consider all the circumstances of your insolvency, particularly if the application of sanctions is discretionary.
If you are expelled from your RPB, re-admission may be possible and your RPB may also grant a right to appeal. Your RPB may also have a benevolent fund available to assist its insolvent members by providing advice or financial assistance or both. Again, your IP should be able to advise you on these matters and of course you should always consider obtaining legal advice, particularly when the practice of your profession and therefore your livelihood may be threatened.
In the next article in this series, we will look at some specific professions and compare the effects of BCY with those of an IVA.
To explore this option further please contact us at National Debt Relief.
About National Debt Relief
National Debt Relief belong to a firm of leading chartered accountants who are one of the largest insolvency practices in the UK. We offer a complete portfolio of personal insolvency services in relation to IVA, Debt Management Plan and Bankruptcy. All our advice is free. If you decide that you wish to pursue the IVA option, we will still provide advice on all of the other options and if we consider an alternative option to be more appropriate to your case and circumstances, we will tell you this. All of our approved IVA’s are administered by Licensed Insolvency Practitioners. We charge no fees and receive no income until your IVA is accepted by your creditors and then our fees come out of your agreed payments to your creditors. If your creditors do not accept your IVA, we receive no fees whatsoever.
Call us on 0800 043 5135 or 028 71 376854 or email enquiries@nationaldebtrelief.co.uk
