Other Business Debt Options
Contents
Breathing Space rules for Business
Individual debt solutions
In addition to all of the corporate business centred options for dealing with financial distress, there are some personal insolvency options too.
This is a complex area for business owners especially when they have personal debt and even more so if their personal debt has been going into their business. It's important to disclose both sides of your debt situation, personal and business, before choosing the best option for you.
Breathing Space rules for Business
Breathing Space rules for Business
The GovUK Standard Breathing Space Scheme provides legal protection to prevent debt enforcement, it freezes interest and charges and stops creditors from contacting you for 60 days. There is no limit to how much debt can be included.
The Mental Health Breathing Space Scheme provides the same protections but runs for as long as crisis treatment is still being received. It's also available any amount of times while there is crisis treatment, compare with the standard breathing space scheme which can I only be applied for once within a 12 month period.
Only an approved debt adviser can apply for the GovUK Breathing Space schemes., you cannot do this yourself.
Some business debts can be included in the breathing space schemes, with the following exceptions:
Any business debt relating to an individual/company registered for VAT is not eligible for a GovUK breathing space scheme.
A partnership business related debt is not eligible for a GovUK breathing space scheme.
A limited company's debt is not eligible for a GovUK breathing space scheme.
It can be difficult to see whether business debt is personal or business sometimes, it is therefore important to provide as much detail as possible to your debt adviser so that can be confirmed to you.
Individual debt solutions
Individual debt solutions
If you are an active director of on Companies House, you cannot apply for a debt relief order or bankruptcy unless you get permission from a court. However, if you are able to dissolve your limited company, and remove your name from Companies House, you can then apply for them if you have personal debt to discharge.
Here are the other options for eligible businesses:
Debt Relief Order: You can only apply for a debt relief order if you meet all of the criteria. There is a one-off application fee of £90. You are not required to make any further payments after being approved. Please read our guidance.
Bankruptcy: As a sole trader or an individual in a business partnership, you have liability for business debt and can include this in a bankruptcy application. There is a one-off application fee of £680. If your disposable income is assessed by the Official Receiver as being over £20 pcm, you may be required to pay an income payment order for 36 months. If your business or you personally own any assets of value, these will likely be sold to raise funds to distribute to your creditors. Please read our guidance for more detailed guidance on bankruptcy.
Individual Voluntary Arrangement (IVA): An IVA provides a director of a limited company a way of doing a formal debt solution while remaining as a director. However, voting creditors need to be satisfied with the proposal presented to them and not all IVA's are approved. There is usually no up-front application fee, but it is always important to check before your proceed. You will need to make affordable payments. Please read the guidance on our webpage.