If the debtor is an individual, which proceedings could a creditor consider?

If the debtor is an individual, which proceedings could a creditor consider?

• A. Administration
• B. Winding-up proceedings
• C. Bankruptcy proceedings
• D. Liquidation

Answer: (C)

The main idea is that insolvency options depend on whether the debtor is a person or a company. For an individual debtor, the remedy a creditor can use is bankruptcy. A creditor can petition the court for a bankruptcy order when the debtor owes a qualifying debt and cannot pay. Once the order is granted, a trustee in bankruptcy is appointed to take control of the person’s assets, realise them, and distribute the proceeds to creditors in statutory order. Bankruptcy also imposes certain restrictions on the debtor and may lead to discharge after a period. The other options are aimed at companies. Administration is a rescue mechanism for insolvent companies to attempt to preserve the business, not a remedy for an individual. Winding up and liquidation are processes used to wind down a company’s affairs and distribute its assets, not to deal with an individual’s debts. Hence, bankruptcy is the appropriate route when the debtor is an individual.

The main idea is that insolvency options depend on whether the debtor is a person or a company. For an individual debtor, the remedy a creditor can use is bankruptcy. A creditor can petition the court for a bankruptcy order when the debtor owes a qualifying debt and cannot pay. Once the order is granted, a trustee in bankruptcy is appointed to take control of the person’s assets, realise them, and distribute the proceeds to creditors in statutory order. Bankruptcy also imposes certain restrictions on the debtor and may lead to discharge after a period.

The other options are aimed at companies. Administration is a rescue mechanism for insolvent companies to attempt to preserve the business, not a remedy for an individual. Winding up and liquidation are processes used to wind down a company’s affairs and distribute its assets, not to deal with an individual’s debts. Hence, bankruptcy is the appropriate route when the debtor is an individual.