A personal problem?


Invariably, when we talk about insolvency people start thinking of the likes of BHS, Toys “R” Us and other large corporate concerns. However, what about a problem that is closer to home?

The Insolvency Service recently released the statistics for Q2 of 2018. These show corporate insolvency numbers were down on the previous quarter (although still higher than the equivalent period of 2017) whereas personal insolvency reached its highest level since 2012.  In fact, in the 12 months ended 30 June 2018, 1 in every 433 adults in the UK entered some form of personal insolvency.

What is interesting is the number of individual voluntary arrangements (in short, a deal with your creditors) continue to exceed bankruptcies. The reason for this could be in 2015 the minimum debt for which you can petition for someone to be made bankrupt increased from £750 to £5,000.  Alternatively, it is more likely people are taking responsibility for addressing accrued personal debt and seek to enter into an IVA as a means of managing their affairs.  A recent profile case is that of Katie Price (aka Jordan) whose bankruptcy hearing was adjourned while her advisors look at the viability of her entering into an IVA.  You have to wonder how someone previously reported as being worth £45 million finds themselves in that position but it does demonstrate it can happen to anyone.

It is very simple to say people who fall into personal insolvency were reckless and spent beyond their means. However, examples I have handled include:

  • A solicitor who was hit with partnership liabilities two years after he had left the partnership.
  • Directors whose company fails resulting in personal guarantee liabilities arising.
  • The legacy of ill health or a divorce.
  • Redundancy causing a dramatic reduction in household income.

It seems, these days, people who end up falling into bankruptcy are either those who have simply nothing material to lose (or offer to creditors) or have buried their head and just let the level of creditor antagonism increase to the point of no return. Invariably, those who PBC have assisted find putting a proposal to creditors for an IVA far more likely to succeed than someone who has delayed, procrastinated or simply frustrated creditors to a point they lose any sympathy when it comes down to voting.  The message remains as always, the sooner you take advice the better the situation is likely to be.

Should you require any advice or assistance with your financial affairs then please contact either Gary Pettit or Gavin Bates at PBC Business Recovery & Insolvency 

What is insolvency and does it apply to me or my business?

Insolvency is a very simple situation that can need a very difficult and sometimes complex resolution. If you find yourself in a situation where you are potentially insolvent you will need to take a long, clear look at things and decide what is the best option. In this video, Kym Carvell looks at what insolvency means for a business or individual. With over 30 years of experience of insolvency, Kym is a respected member of our team who is able to explain financial situations with clarity, honesty and a sympathetic ear. If you think the situations described in this video may apply to you, or your accountant is flagging a potential issue, your best option is to contact us as soon as possible so we can begin working towards a resolution.


So what went wrong?

The most common reasons why businesses fail

“If you fail to plan then plan to fail”. A well-known phrase that everyone in business should have hanging in a prominent place as a reminder that operating a business carries risk as well as reward.

Nobody takes that brave leap into being self-employed thinking their business will fail within the first two years. However, many start-ups find themselves in difficulties within this time frame, generally as a direct result of a failure to plan.  I appreciate I will not win many friends by saying this but the business acumen in this country is poor and the general knowledge required absent.  If I had a pound for every time a director referred to the assets of a limited company as his assets when they are actually company property………

Putting it another way, if you build a house on poor foundations then you can expect that house to fall down eventually. Similarly, if you do not start a business on sound footing from the outset you are promoting failure.

This article could dominate several pages if I were to go into any real detail but, generally speaking common areas leading to difficulties in the near future of a start-up include:

  • No business plan (including cash flow forecasts) from the outset. If you have a business idea then putting that down in writing should inform you if that idea is viable and what is likely to be the requirements. It also supports any application for third party funding, such as from banks.
  • Choosing the wrong trading vehicle (e.g. limited company, partnership etc.).
  • Over-borrowing from the outset, leaving start-up costs creating a financial commitment that eventually becomes a burden too great.
  • Not registering for VAT or PAYE. In one case I handled the company had been over the VAT threshold requirements for three years yet was not VAT registered. It was one of the grounds for him receiving a custodial sentence!
  • Not accounting for receipts and payments properly.
  • Entering into contractual obligations without fully understanding the implications.
  • No trading terms and conditions upon which to fall upon when things go wrong.
  • Not monitoring cash flow. Most business failures have reached a stage where cash is exhausted so they cannot pay the bills.


The advice to any would-be new business owner is to take advice. Speak to an accountant who can help you determine what the appropriate trading vehicle for your business is, assist with VAT registration and guide you through how to ensure your day-to-day accounting is correct.  Equally, a commercial solicitor can draw up your terms of trade that maximise protecting your business interests and can steer you with regards to any agreements you are asked to sign.  Finally, do not overlook the role of commercial banks as they can assist in the most appropriate form of funding the business, both at start up and going forward.

I use a phrase, “You do not have a dog and yet bark yourself.” Unfortunately, all too often business people come to me and it is clear they have not grasped that concept.

If you require any advice or assistance on mediation matters, or any other insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss your situation. Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.

What is the difference between Corporate and Personal Insolvency?

When you realise you are potentially in a position where you or your company is insolvent you will need to take action as soon as possible. It is sadly not uncommon for corporate and personal insolvency to be bedfellows, but they are different so you will need to make sure you are approaching it from the right perspective. One of the very early discussions we often need to have with our clients is the difference between their personal and corporate financial responsibilities. Kym Carvell explains how to answer the question ‘what is personal insolvency’ and the difference between that and corporate insolvency in this video. She also discusses some of the confusion surrounding the liability status of sole traders and the common reasons why some companies can become insolvent.