With stricter lending conditions and banks reluctant to let us borrow money, many people are in desperate need of some debt advice that can alleviate their debt management issues.
Professional solutions
Professional debt solutions such as Individual Voluntary Arrangements
(IVAs), Debt Management Plans (DMPs) and Trust Deeds do not involve
borrowing more money and do not require you to pass a credit check.
This means that you no longer have to go further into the red each
month and can get out of debt
for good. All of these allow people who are struggling to maintain the
payments on their unsecured balances (personal loans, catalogues, store
cards and credit card debts etc) to regain control of their finances
whilst still repaying all, or a proportion, of the amount that they
owe.
Informal professional solutions (like a Debt Management Plan DMP)
work by gathering all unsecured balances into one single monthly
payment which is paid to the debt help provider thereby simplifying finances, as only one payment needs to be made each month.
The provider then distributes this payment between creditors on a pro
rata basis, so the more that a creditor is owed the more of the monthly
payment they will receive. Reputable providers will also negotiate to try and have
interest and charges reduced or frozen, which reduces the total amount
owed.
A DMP is classed as an informal
arrangement as there are no contracts involved so you have the ability
to use this solution as-and-when-required. There is also flexibility
with payments on a DMP, as the amount you pay is dependent on your
affordability you only pay how much you can realistically afford once
priority payments like your mortgage/rent, council tax, food, travel
etc have been accounted for.
More formal debt solutions, such as an IVA
or Trust Deed, also enable multiple unsecured balances to be repaid but
involve a contract. The agreement protects you from creditors changing
their payment demands or from the terms of the agreement being changed.
The insolvency practitioner can provide support and IVA advice
or guidance throughout the term of your IVA or Trust Deed. IVAs and
Trust Deeds are repaid over fixed periods of time. With an IVA this is
generally within a five year period, whereas with a Trust Deed it is
typically over three years.
One of the most appealing benefits of a more formal solution is that
they allow a proportion of the debt to be written off after the term
has been satisfied this means that any remaining unsecured debt is
written off and you can walk away debt free.
Professional debt solutions like those listed above can be used by
overstretched individuals to prevent bankruptcy and are generally
offered following some impartial advice from a reputable debt help
organisation.

Source: Daily Express (Your Money)

Kerry Katonas bankrupt status will not be lifted for the foreseeable future, it has been claimed.

According to The Mirror,
the reality TV star had hoped that her financial woes would end this
month, but has been hit with a new setback after the Insolvency Service
won a bid to have her planned discharge suspended indefinitely on
July 14.

Katona was declared bankrupt at Londons High Court in August 2008 after she failed to pay the remaining 82,000 of a 417,000 tax bill.

It
has now been alleged that the status could remain in place until next
year, meaning that the ex-singer will continue to make regular payments
to her creditors.

Though it would not comment specifically on
Katonas case, the Insolvency Service confirmed: For a bankrupt to
have their discharge suspended, something serious would have had to
have been brought to our attention.

Many people still think that Bankruptcy is an easy way out Go
Bankrupt draw a line in the sand and in 12months time, start
again

It isnt really that easy

If youre contemplating bankruptcy, get some quality advice before you make your move

Individual Voluntary Arrangements The Advantages

IVAs dont suit everybody, but for those who do meet the criteria, the benefits are fantastic:

• You can legally write off up to 75% of your debt.

• You can reduce your monthly repayments by calculating how much you can afford to repay each month & then make just one affordable repayment.

• You can stop all your creditors, debt collection agencies & bailiifs hassling you (your Insolvency practitoner will take care of all this).

• You can avoid Bankruptcy.

Example Scenario:

Tony has 125,000 worth of Debt including 5 credit card debts, 1 personal loan, income tax debts & business debts (with personal guarantees). He also owns his family home which has a current open market value of 200,000 with an outstanding mortgage of 175,000.

Tonys monthly debt repayments (credit cards, personal loans etc) currently amount to 1200 per month but he is currently living off his credit cards to enable him to stay on top of these repayments he is basically robbing Peter to pay Paul.

Tony has been approached by a Company who claim they can write off all his debts for a fee of 1800. Tony has correctly stated that even if they are successful (which is a gamble in itself) he will still have his tax debts & business debts to worry about, so there really is no point (Nice try though, eh)

Tony has a monthly income of 2500 (after allowance for tax) and monthly expenses of 2225 (without the above debt repayments).
Tony has entered into an IVA that protects his family home by selling the equity in the house to his Mother & Father for 15000 (using a realistic immediate sale value, less costs) & paying just 275 per month for 5 years.

Tony has therefore cleared all his 125,000 debts by paying only 31,500 & reduced his monthly debt repayments from 1200 to 275.

Tony is a very happy man

IVA Services
Entering into an IVA can be very daunting, thats why I provide the following services, entirely Free of charge to all my clients:

• Initial Free assessment to ensure an IVA is the right debt solution for you & your circumstances.

• Preparation of your Income & expenditure account.

• Preparation of additional financial statements, including cash flow forecasts, budgets and forecasted Profit & Loss accounts where required.

• Advice on saving your family home in an IVA.

• Attendance at meetings; the IVA meetings themselves can often be quite daunting, if necessary I will attend your IVA meetings with you to advise & assist you through the process.

Call me now on 0800 533 5370 for further details of IVAs & how they can solve your debt problems.

If youre finding it difficult to pay off your debts and you dont qualify for an IVA, a Debt Management Plan may be just the thing for you.

So what is involved in a Debt Management plan?

• By taking out a Debt Management Plan you pay back the debts you owe to your creditors in affordable, regular instalments;

• you make only one payment directly to a Debt Management Company which will then divide the payment fairly between all your creditors.

• An additional advantage of this method is that you dont have to speak to your creditors yourself to arrange the plan; the Debt Management Company does it for you.

• The main Advantage to a Debt Management plan is that it is not a legally binding agreement meaning that you can cancel the plan at any time.

• But the main Disadvantage to a Debt Management plan is that it is not a legally binding agreement meaning that your creditors can cancel the plan at any time

The other major disadvantage of a Debt management plan when compared to an IVA is that the plan will continue until your debts are cleared or until you wish to end the arrangement (for example if your income improves and you can afford to revert to the original monthly payments).

Therefore with a Debt management plan you dont have the advantage of writing off up to 75% of your total debt as you do with an IVA, but you can enter into a plan if youre debts are less than 15,000 or if you have surplus assets that prohibit you from entering into an IVA.

If you feel that Debt Management is your best option, give me a call on 0800 533 5370 now to discuss it further.

Most people feel that the UK Insolvency / Debt solutions industry is a minefield. There are so many options, but so few truly independent advisors.

Many so called advisors are merely selling their own particular product or service, others are using call centres where the person who is advising you has no real knowledge or experience of debt & is just working from a sales script. So what are your main options?

Well, theres a lot to be said for brevity so, Ill keep this nice & brief;

1. DEBT CONSOLIDATION take out a new loan to consolidate your debts into 1 easily manageable payment. The credit crunch has made this option much harder particularly for people with adverse credit ratings.

2. DEBT MANAGEMENT Utilise the services of a Debt management Company to deal with all your creditors on your behalf, you make one affordable payment & they apportion/share it amongst your creditors .

3. UNFAIR CREDIT AGREEMENT AUDITS this option is very widespread at the moment & comes in many different shapes & sizes but some experts are questioning whether it will actually work or not, particularly now that the Government own 50% / 60% of some of the major banks. This option could work & if it does all or some of your debts could be written off, but beware the sharks Ive heard reports of Companies charging large up-front fees & then doing nothing/very little for months whilst other Companies are charging large back-end fees using CFAs (conditional fee agreements) if youre unable to pay their fees they could (and will) petition for your bankruptcy.

4. IVAs / INDIVIDUAL VOLUNTARY ARRANGEMENTS; this could be the best option for many people with debts over 15,000. Up to 75% of your debt is written off & the remainder is repaid over a period of time (up to 5 years) with 1 monthly repayment. However, selecting the right Insolvency practitioner for an IVA is very important; choose one of the dodgy ones & you could easily end up paying thousands, & still end up bankrupt (I have personal experience of this).

5. BANKRUPTCY; The last resort for most people but the only real option for many. An opportunity to draw a line in the sand by writing off all your debts. As I say though, this really should be viewed as a last resort due to the restrictions & inconvenience bankruptcy causes. Youll generally be discharged from bankruptcy within 12months but give serious consideration to an IVA before you go down this route.

The most important thing to remember is to obtain quality independent advice and establish which option is best for you & your circumstances. Many Debt advisers/experts are selling one particular debt solution, so theyre bound to say that their solution is better than all the others, they wouldnt be in business for very long if they didnt

If you need help choosing the right debt solution for you & your circumstances, give me a call on 0800 533 5370 now to discuss your situation further.

If your Company is in serious debt, there is a powerful, legal way of solving your problems that would result in selling your business on to a third party, which can be a totally new Company a newco or to the existing directors.

The name for this solution is pre pack administration.

The steps involved in a pre-pack administration are as follows.

Step 1:

Due to the poor financial health of your Company you seek advice from insolvency practitioners or even turnaround experts. It is possible that you are receiving threats or CCJs or statutory demands from your landlord, creditors or HMRC (for PAYE and VAT) and your bank. You, as directors, should be worried about wrongful trading (trading insolvently) and therefore becoming personally liable for your Companys debts.

The advice you receive from the insolvency practitioners / turnaround experts will be thorough and a full report will be prepared for the Directors (and possibly for the bank). All other Corporate debt solutions will have been considered and discussed in detail including company voluntary arrangements (CVAs), sale of the business on the open market, refinancing, administration and creditors voluntary liquidation.

If pre-pack administration is the best option, once all options have been considered, this decision will be made by the directors. A board meeting will be held and a resolution passed stating the companys board will consider the option in greater detail.

The resolution should include the appointment of formal advisors, either insolvency practitioners, turnaround practitioners or Accountants to act as advisors to the board.

Step 2:

If the plan is to sell the business (not the company) to a newco then a business plan for the newco must be drawn up. We recommend that this includes detailed profit and loss forecasts, cashflow forecasts and balance sheet forecasts. This will give an indication of working capital requirements. The proposed administrator will require this as evidence that the new company can be viable.

If the plan is to sell to an existing trading company, the IP will require copies of management information and accounts from that buyer. Again this is necessary to ensure the acquiror is viable and can afford any payments for the assets being acquired.

A qualified accountant should be contracted to provide this forecast pack in my view. My trained accountants and specialist forecasters can provide such a service.

Step 3: Compliance issues.

Under insolvency practitioners guidelines (known as SIPS) the IP must market the business. Often this requires sending sales memos to a database of potential buyers, or the IP may place an advert on his website and/or a local or national newspaper. If he gets no interest or no indication of interest he can then sell to the newco or third party. If there is a lot of interest and several offers, beware your business could fall into a competitors hands! You may still be able to buy the business back, but the outcome is not under your control

He or she will also have to get formal valuations of the assets, intellectual property and or goodwill of the insolvent company by RICS qualified surveyors. Generally any offer needs to be commensurate with such valuations.

At this stage if you and your colleagues are planning to buy the business you must be careful with regards to your personal position. As directors of the dying company you have a fiduciary duty of care to the companys creditors.

Starting newco can put you at risk of conflict of interest. Its likely that you will need separate legal advice on both companies. Best to talk to lawyers with insolvency and pre-pack experience.

The IP will take advice from his lawyers as to compliance and risk. He may require this advice to be paid for along with his disbursements. Strictly speaking he cannot charge time costs in advance for the pre-pack work but he will charge for consultancy and fees.

WARNINGS?

Beware will your clients contracts or BANK allow you to pre-pack? (The current stand point of several clearing banks is no they wont support pre packing to the incumbent directors/shareholders).

Will your landlord(s) allow a new company to occupy their property? Are your suppliers prepared to supply a newco? Will your creditors be angry about this approach? Some readers may have seen negative media coverage of pre-packs is rising sharply, almost in line with the economy shrinking. In future we see many more people attacking pre-packs, especially creditors and the media.

Step 4: Raising finance

You will need finance to fund the acquisition of the assets and business. There are many specialist lenders who can provide: factoring, asset based lending, loans and bank facilities. Some venture capital companies or angels may help fund the pre-pack as part of a buy and build strategy we have a number of contacts that can help with this.

Financing a pre-pack in 2009 is likely to be very difficult and will probably require personal guarantees from the directors for SMEs. Larger companies may find that the private equity and venture capital buyer, removes the directors as part of the pre-pack conditions.

Once again the funders will require a detailed plan supported by forecasts, they will want to test the valuations, the possibility of making and funding a loss and how their security needs will be met. So its vital to get these built. Call us if you need that done.

Step 5

Assuming that you have raised the finance, the proposed administrator has satisfied his compliance requirements and the board of newco believe they can fund the acquisition, then its all systems go.

A contract is likely to be drawn up that appoints the proposed administrator formally. He will then initiate the pre-pack administration by contacting any floating charge holders like banks or lenders with security. If they have no objections (and often they are involved in funding newco) then he can proceed.

Beware some banks will NOT allow a pre-pack to a related party. RBS, HBOS and HSBC for example will not generally countenance a phoenix with/to directors /members of the failed company. So it may be necessary to take out the bank first.

Assuming all is approved then the administrator makes an application to Court stating his proposals. Almost immediately after that the business is sold to a newco or third party.

This can be done on a Friday night and by Monday the business is trading virtually uninterrupted. Having bought the company name, the oldco see its name changed to something else, like Your Company (Realisations) Ltd.

If you think that your Company can be saved utilising pre pack administration, give me a call on 0800 533 5370 now to discuss it further.

Business Rescue / Turnaround

Turnaround involves the restructure of a financially challenged company with or without the use of a formal insolvency procedure. This is only relevant for companies that have a viable business that can, if freed from debt, trade profitably.The Turnaround culture for financially distressed companies now firmly exists. It is being embraced by financial institutions as well as the accounting and insolvency professions and is particularly good news for entrepreneurs and risk takers who are so vital in industry.

What is Turnaround?

It can simply involve an informal workout with a key group of creditors but is more likely to include a detailed appraisal of the companys trading operation and the implementation of a programme to ensure the company survives and returns to profitable trading.

A well structured turnaround programme can avoid formal insolvency.

The key elements to a turnaround programme include:-

• Assessment of the business to ascertain whether it is viable;
• Identification of areas for restructuring and development of a programme for the implementation of changes required. This alone may not be sufficient to ensure the company can move to a positive trading position;
• Address cashflow problems by introduction of new/additional sources of funding. Funding options include debt, stock, asset finance as well as general and equity finance. Half the battle is knowing who to talk to;
• Management of turnaround programme. The companys management team is likely to need support in the early stages of implementation. Part of the programme may require changes in the structure of the management team.

We offer an initial free consultation on the various options that may be available to the company. If turnaround is appropriate, we will provide an estimate of our costs for carrying out a viability review and assisting with the drafting and implementation of the turnaround plan.

As with all debt solutions, selecting the right Insolvency practitioners for your Business Rescue requirements is of paramount importance. If youre not sure which Insolvency practitioner to use call me now on 0800 533 5370

There are 3 types of liquidation

(i) Members Voluntary Liquidation

A Members Voluntary Liquidation MVL is a voluntary procedure to wind up the affairs of a solvent company.

Solvent, what does this mean?A company is capable of paying its liabilities in full plus statutory interest plus the costs involved in winding up, within 12 months.

When is the MVL procedure appropriate?When a solvent company has come to the end of its useful life and needs to be wound up. For example:-

• Shareholders want to retire and have a property within the company which they want to transfer into their personal names. i.e. a distribution in specie.
• Rationalisation of a group of companies involving transfer of assets, write off of inter-company loans and winding-up of subsidiaries.

(ii) Creditors Voluntary liquidation

Creditors Voluntary Liquidation CVL is the process where the directors of an insolvent company can voluntarily take steps to wind up the company. The directors call meetings of the companys shareholders and creditors to consider resolutions to wind up the company and to appoint a liquidator.

WHEN IS A CVL USEFUL?

When a company is insolvent and no longer has a viable business worth saving. For example:

A company which has insufficient sales to cover its overheads and cannot continue to trade.

Insolvent, what does this mean?

S123 IA86 sets out the definition of insolvency which includes:- Creditor(s) are owed more than 750 and have either served a 21 day demand which has not been met or judgment has been given or it is proved to the satisfaction of the Court that the company cannot pay its debts as they fall due, or the companys liabilities exceed its assets including contingent liabilities.

(iii) Compulsory liquidation

Compulsory Liquidation, usually referred to as Winding-Up, is the process to wind up an insolvent company through the courts.

Insolvent, what does this mean?

S123 IA 1986 sets out the definition of Insolvency:- Creditor(s) are owed more than 750 and have either served a 21 day demand which has not been met or judgment has been given or it is proved to the satisfaction of the Court that the company cannot pay its debts as they fall due or the companys liabilities exceed its assets including contingent liabilities.

WHEN CAN A COMPULSORY LIQUIDATION OCCUR?

Compulsory Liquidation Winding-up is a court procedure usually initiated by a creditor of the company when all other debt collection procedures have failed. When a company is insolvent and fails to pay its debts, creditors can take steps to wind up the company by issuing a petition to Court. The procedure can also be used by the directors and shareholders of an insolvent company. There are other parties who can petition including the Secretary of State, the Official Receiver and a Supervisor of a Company Voluntary Arrangement.

If you feel that liquidation is the most appropriate debt solution for your Company, pick up the phone and call me now on 0800 533 5370

Administrative Receivership is a procedure that can only be instigated by a secured creditor with a valid floating charge over the assets of the company. This is usually the companys bank.

The charge must have been created prior to 15 September 2003. With a few exceptions, secured creditors with charges created after 15 September 2003 are no longer able to appoint an Administrative Receiver. Administration is viewed as an alternative action.

An Administrative Receivers role is to achieve the best outcome for the appointing chargeholder.

Examples:

The company is insolvent but there is a strong chance that the business can be sold on and there is a floating charge creditor with the power to appoint an Administrative Receiver.

It appears to the floating charge holder that there is a risk the assets covered by its charge are likely to be diminished by continuing trading.

If you think that your Company can be saved via an Administrative receivership, give me a call on 0800 533 5370 now to discuss it further.