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Insolvency Guide UK

Guidance for directors under pressure

Important: This guidance relates to company insolvency in England and Wales.

Does insolvency write off debt?

Which company debts may end with insolvency and what may still continue afterwards.

Debt and consequencesLast reviewed: 2026-04-11

Short answer

Insolvency does not simply make all debt disappear in the same way for every case. Some company debts may be dealt with through liquidation or restructuring, but that does not mean every liability vanishes or that directors are automatically protected from every consequence.

Plain-English explanation

When a company enters insolvency, the treatment of debt depends on the process and the type of liability involved.

For example:

  • some unsecured company debts may remain unpaid because there are insufficient assets
  • some debts may be compromised through a restructuring process such as a CVA
  • secured lenders may still enforce their rights against secured assets
  • personal guarantees can leave directors exposed even if the company fails

So the better question is not “does insolvency write off debt?” but “which debts remain, which are dealt with formally, and who is still exposed afterwards?”

Why this matters for directors

This matters because directors often assume insolvency solves the entire problem automatically.

That can lead to misunderstandings about:

  • personal guarantees
  • tax liabilities and enforcement risks
  • creditor claims that survive in another form
  • whether directors themselves remain exposed

It is important to distinguish between company debt being left unpaid in insolvency and personal liability arising separately.

What to check now

Directors should review:

  • which debts are company liabilities only
  • whether any guarantees have been signed
  • whether secured creditors are involved
  • whether HMRC or other creditors may still pursue connected issues
  • which insolvency route is actually being considered

What usually happens next

Usually one of these happens:

  1. Debt is dealt with through the insolvency process
    Creditors receive what is available under the process.

  2. Some exposure remains elsewhere
    Guarantees or related liabilities continue after the company process.

  3. A restructuring route is used instead
    Debts are renegotiated rather than simply left behind.

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