Recent statistics show a record number of people becoming insolvent and proposing an Individual Voluntary Arrangement (IVA) to their creditors and it looks as though Katie Price is being forced by creditor pressure to join their ranks.
From press reports it appears that Katie owes about £22k to judgement creditors but the more urgent issue is bankruptcy proceedings against her by HMRC for tax. In court in London on 7 August those proceedings were adjourned until the end of October to allow her time to put together an IVA proposal.
So what does this mean? First, she is clearly under very significant financial pressure and even if she has lots of assets she does not have the cash to pay what is due now. She is apparently selling assets to generate cash and this could be the essence of any IVA proposal – to persuade creditors to allow her time to raise money so that they get a better return than in a full bankruptcy. The IVA will require full disclosure of her finances to creditors and for 75% by value of creditors to support the proposal.
And if they don’t? It looks likely that the HMRC bankruptcy petition will be made into an order and a Trustee will be appointed. If so, then all of Katie’s assets will pass to the Trustee leaving her with only basic domestic necessities and the right to earn and keep a “reasonable” income to support her and her family, with the rest going to her creditors – at least for a year until she would normally be discharged.
Quite a comedown for this celebrity!