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Communtity Law Manual | Credit & debt | A creditor’s proposal

When you can’t pay your debts: Bankruptcy and other options

A creditor’s proposal

What is a “creditor’s proposal”?

Insolvency Act 2006 ss 325-339

A creditor’s proposal is an alternative to bankruptcy and is a private but formal arrangement between you and your creditors. It has the advantage that you can still carry on in business and it doesn’t have to be advertised like bankruptcy.

How do I arrange a creditors proposal?

You’ll need a majority of your creditors (that also includes 75% of the value of your debt) to agree to a plan about how and when they will be paid. At the end of this period (usually between 3-5 years) your remaining debt is written off. You will need to get help from a lawyer or accountant to draft the agreement. This must be approved by a court but doesn’t have to involve the Official Assignee. A trustee is appointed to oversee the proposal. The trustee has to file a summary of receipts and payments with the court every six months. Once the proposal is approved your creditors can’t take action against you for those debts without the court’s permission.

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