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)

For most people Bankruptcy really should be seen as a last resort, but if youre unable to take advantage of any of the other debt solutions available or if they simply do not suit your circumstances it may be the best way out.

The Enterprise Act 2002 came into force on 15th September 2003. It made various changes that reduced the effects of Bankruptcy, including:

• Reduce the number of restrictions that are automatically imposed on undischarged bankrupts and provide for the automatic discharge of nearly all bankrupts after a maximum of 12 months.

• Introduce Bankruptcy Restrictions Orders (BROs) to protect the public and the commercial community from bankrupts whose conduct before and during bankruptcy has been found to be culpable.

• Introduce Income Payments Agreements (IPA) as an administrative alternative to court-based Income Payments Orders (IPO). IPAs will carry the same conditions as IPOs and both will be able to run for a period of up to three years.

• Enable the Official Receiver (OR) to act as nominee and supervisor of new fast-track IVAs begun after bankruptcy order has been made.

• Require the Official Receiver to investigate why a bankrupt failed only where he thinks that this is necessary.

• Limit to three years the period in which a trustee may deal with a bankrupts interest in the sole or principal home of the bankrupt, the bankrupts spouse or a former spouse before that interest revert to the bankrupt.

For many people, bankruptcy is a way of drawing a line in the sand with regards to their debts & although it is never to be seen as an easy way out or an ideal solution, it can serve a purpose in certain circumstances if (and only if) all of the other debt solutions, e.g. IVAs are unsuitable.

If you think that Bankruptcy is your only option, phone me now on 0800 533 5370 & speak to somebody who has just been through it

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