This type of compromise is governed by Part 5 of the Insolvency Act 2006 and provides a mechanism for insolvent individuals to make a proposal to their creditors. Individuals may be motivated to make a proposal to their creditors as they may wish to avoid entering bankruptcy.
A successful personal compromise involves transparency on the debtor’s part with their creditors. This transparency extends to disclosing their asset position and declaring their liabilities. A meeting of creditors is held once notice is given to all creditors advising of what the proposal to creditors is and distributing the asset and liability position to consider.
These informational requirements, communication with creditors and convening a meeting of creditors is arranged by the nominated provisional trustee. The insolvent individual also lodges the proposal document with the High Court.
Any compromise proposal put to creditors is voted on. In order for it to be accepted and binding, it requires a majority in number and 75% by value of creditors voting on the proposal. If passed, the insolvent individual must then apply to the High Court for approval where it becomes binding on all the insolvent’s creditors. The Trustee is then tasked with administering the compromise with the creditors.
If you need to discuss your personal insolvency options, please contact us to discuss how we can help you.
Other areas in Creditor Compromise: Company
