[2] Sole traders are a distinct legal entity, operating as one type of UK business structure.
This legislation provides the legal framework for two key formal insolvency solutions relevant to sole traders: namely bankruptcy and Individual Voluntary Arrangements.
It also makes provision for company insolvency[8] Bankruptcy laws vary somewhat between Scotland, Northern Ireland, Wales and England.
[example needed] Bankruptcy requires the surrender of all valuable assets to the Official Receiver, including any property interests.
IVAs are facilitated by an Insolvency Practitioner and are an agreement that the individual will repay agreed instalments over a fixed period of time.
Two cases were heard in the High Court of circumstances where this interim order had been granted but landlords were nonetheless able to lawfully gain the right of peaceable re-entry / seizing of goods in respect of rent arrears.
The Insolvency Act 2000 accordingly introduced amendments aiming to prevent this type of intervention and accordingly promote the negotiation phase instead.
By contrast, Individual Voluntary Arrangements are legally binding on all creditors providing those representing 75% of the total debt owed agree to the IVA proposal.
[15] A creditor may petition for an individual’s bankruptcy using a prescribed series of legal steps and must be owed a minimum fixed amount of debt of at least £750.
Following the issue of a bankruptcy order from either route, the individual cedes control of their assets to an Insolvency Practitioner, to be sold to raise funds towards repaying creditors.