Put in its simplest terms, bankruptcy is a financial mechanism that allows individuals, including those operating certain businesses, to address overwhelming debt.
A declaration of bankruptcy is the formal, legal acknowledgement that you are unable to meet your financial obligations.
How it affects your business depends on what type of business structure you’ve chosen. For example, if you are a sole trader or operate your business as a partnership, your business income and debts aren’t legally separated from your personal income and debts. This means that you, or you and your partners can declare bankruptcy only as individuals; the business itself can’t declare bankruptcy.
Because bankruptcy has considerable, lasting consequences, it is vital to seek financial and legal advice before pursuing this option. While working with you, your financial adviser and creditors, we can protect your rights and help find the solution that is best for you.
Know your rights
If you are a sole trader or business partner who is unable to cope with growing debt and are considering bankruptcy, it is important to understand your legal rights under the Bankruptcy Act, 1966.
In addition to the right to pursue bankruptcy, these include the rights to:
- Make a Declaration of Intention (DOI), which temporarily suspends your debts.
- Enter into a debt agreement with your creditors.
- Enter into a personal insolvency agreement.