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Bankruptcy and insolvency register use against bad debt

Careful due diligence is needed in business to decide the credit risk of a customer and the suitability of an individual as a business partner. Bankruptcy is the worst-case scenario should you fail to protect the interests of your firm, and the bankruptcy and insolvency register should be the first step to doing so.

 

The bankruptcy and insolvency register explained

The bankruptcy and insolvency register is a database of individuals in England and Wales who have either gone bankrupt or entered into an agreement to handle their debts. The register is organised by the UK government, and includes details of when individuals have been freed from debt through bankruptcy, as well as information on Debt Relief Orders and Fast Track or Individual Voluntary Arrangements. 

Searching for an individual is simple and straightforward, as they can be found by searching the register online using their name or trading name. When an insolvency case ends, the individual’s details are removed from the register within three months, but evidence of their financial history can still be viewed via a credit report. 

What to do if a client goes bankrupt?

If a client goes bankrupt, you should prepare for the worst and expect not to receive any money owed, but still take steps to chase funds. Start by completing a cost-benefit analysis to establish whether it’s worthwhile to pursue what’s owed, as the disruption may outweigh the financial gain. If you do decide to attempt to recover revenue, file a proof of claim to give notice to the court, debtor, trustee and other creditors of your intentions. It’s then a case of waiting for the insolvency proceedings to finish, and during this time it may be wise to consider your approach to avoiding missed payments. 

Make debt avoidance an ongoing focus

While it’s prudent to protect against client debt by taking steps to avoid it in the first instance, it shouldn’t end there. With continued risk monitoring you can remain up to speed on any developments that threaten to destabilise a client, and take action to ensure they can meet the agreed terms. This could mean a renegotiation of prices, interest or term lengths to recoup some of the owed funds, even if it isn’t the full amount. 

Not all debtors receive owed payments following bankruptcy proceedings, and this risk should be considered carefully when a client is struggling to pay off their debt. Protect from the start of the relationship to safeguard future profits.

 

Do you want to know what the future holds for Credit Management and how to adapt towards these influences? Go directly to our download center and download the eBook for free!

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