What happens to my creditors during insolvency?
When you enter a formal insolvency process, creditors are notified and legally prevented from taking further action without going through the appointed insolvency practitioner. Whether you’re using a CVA, IVA or liquidation process, the practitioner takes over communications, assesses claims, and arranges how funds will be distributed. Creditors are usually asked to submit details of what they are owed, and payments are made in priority order where funds allow. For many creditors, receiving something through a structured process is preferable to forcing legal action. In Birmingham and beyond, a well-managed insolvency helps protect your business or personal reputation by handling creditor concerns in a fair, regulated and professional way.
How does HMRC deal with unpaid taxes?
HMRC is one of the most active and persistent creditors in the UK. If taxes such as VAT, PAYE or Corporation Tax remain unpaid, HMRC may issue demands, add penalties or even start legal action including winding-up petitions. However, HMRC will often engage in repayment plans or accept proposals through insolvency arrangements like CVAs or IVAs. It’s vital to be proactive. Avoiding contact only makes the situation worse. Insolvency practitioners have experience negotiating with HMRC and can often propose structured repayments that are accepted. In Birmingham, many business owners have successfully resolved HMRC debt through early intervention and the help of a licensed practitioner.
Can I negotiate a payment plan with HMRC?
Yes, HMRC will often agree to a Time to Pay arrangement if you’re upfront about your situation and have a realistic proposal. These plans allow you to spread payments over several months, helping ease pressure without entering formal insolvency. To be accepted, you must usually demonstrate how the debts arose and how you’ll meet future obligations. An insolvency practitioner can improve your chances of success by preparing cash flow forecasts and presenting your case professionally. If a Time to Pay plan isn’t possible, other options such as a CVA may be more suitable. In Birmingham, many businesses have avoided court action by reaching timely agreements with HMRC.
Do suppliers have to keep working with us?
No, suppliers are not obligated to continue working with a business once it enters insolvency or falls behind on payments. Some may choose to stop supplying goods or demand upfront payments. However, if your business enters a formal process like a CVA or administration, you may be able to negotiate terms that reassure suppliers and allow trading to continue. Building trust and clear communication is key. Insolvency practitioners often help manage these relationships and create agreements that keep essential supply chains in place. In Birmingham’s competitive business environment, maintaining supplier support during tough times can be the difference between survival and shutdown.
What if a creditor takes legal action?
If a creditor begins legal action — such as issuing a statutory demand or a County Court Judgment (CCJ) — it’s important to act quickly. Ignoring it can lead to enforcement steps like bailiff visits or, for companies, a winding-up petition. If you’re facing court action, speak to an insolvency practitioner immediately. They can assess whether the debt is valid and help you respond appropriately. In some cases, they can propose a repayment plan or formal procedure to stop the action altogether. Many Birmingham businesses and individuals have successfully halted legal proceedings through early advice and clear communication with creditors.
Will bailiffs come to my premises?
Bailiffs (now known as enforcement agents) may visit your home or business premises if a court has issued a judgment and it remains unpaid. They are usually instructed by creditors or HMRC to collect outstanding debts. However, once you enter a formal insolvency procedure, bailiff action is generally halted. An insolvency practitioner can inform the court and enforcement agents that a process has begun. If bailiffs do arrive, remain calm and ask for identification. Do not allow them entry unless they have a specific court order. In Birmingham, insolvency practitioners regularly help clients avoid or stop bailiff visits by addressing debts before enforcement reaches that stage.
What is a winding-up petition?
A winding-up petition is a serious legal action taken by a creditor — often HMRC — to close down a company that cannot pay its debts. If granted, the court orders the company to be liquidated. Once a petition is issued, it’s publicly advertised and banks often freeze company accounts, making trading impossible. You must act quickly. If you receive a winding-up petition, contact an insolvency practitioner immediately. They may help you dispute the debt, settle with the creditor, or propose a Company Voluntary Arrangement to halt proceedings. In Birmingham, many businesses have avoided closure by taking urgent action at this stage with professional support.
Can creditors block a CVA?
Yes, creditors can vote to reject a proposed Company Voluntary Arrangement (CVA). For it to be approved, at least 75% (by value) of the voting creditors must agree. If they believe the proposal is unfair, unrealistic, or lacks transparency, they may reject it. That’s why it’s essential to present a clear, honest plan backed by solid financial projections. Insolvency practitioners help draft proposals that address creditors’ concerns and increase the chance of approval. In Birmingham, businesses that communicate well and offer a genuine recovery strategy are more likely to gain creditor support and avoid rejection. If a CVA is refused, liquidation may be the next step.
How does insolvency affect my business relationships?
Insolvency can put strain on relationships with suppliers, clients and creditors, as it may cause concerns about reliability or continuity. However, if managed professionally, many relationships can be preserved or rebuilt. Entering into a structured arrangement like a CVA can actually restore confidence by showing that you are taking responsibility and planning ahead. Clear communication is key — explain what’s happening, how it affects them, and how you plan to move forward. Insolvency practitioners often help manage these conversations. In Birmingham’s close-knit business community, reputation matters, so handling insolvency with transparency and professionalism can go a long way in maintaining trust and future opportunities.
