January 8th, 2014. Ben Lloyd
Business debt and bankruptcy – advice and solutions
If cash is extremely tight and you are getting calls asking for you to repay money then you may have considered filing for bankruptcy, but do you know there are alternatives if you have a high level of business debt?
Here is a rundown of your options:
Bankruptcy is a last resort debt solution for people who owe money they cannot repay.
To be declared bankrupt a court must issue an order against you after you have submitted a petition. This will be authorised if you are unable to pay your debts or your creditor has applied on your behalf as you own more than £750.
If you are declared as bankrupt then your assets may be seized as payment, you will be given bankruptcy restrictions you must apply to and your details will be published on the Individual Insolvency Register.
Bankruptcy is not forever. After a 12 month term an individual is discharged. The bankruptcy process is different in Scotland and Northern Ireland however so make sure to do your research.
County court judgement
A county court judgement, or, CCJ, is court action that can be taken out if payments are not made and requests of payments are ignored.
If you receive a CCJ then the court has already decided that you owe the money. You will receive a judgement by post which covers details such as how much you owe, how much instalments are and your deadline for paying.
A CCJ will be kept on record for 6 years on the Register of Judgments, Orders and Fines, and may affect your future credit. The only way to avoid this is to pay the debt off in its entirety within a month. If you do not agree with the claims you owe money then you can request to cancel or set aside the judgement.
If you have paid up then you will need to send proof of payment and a £15 court fee for their time.
Alternatives to bankruptcy
Debt consolidation loan
If you owe a small amount of debt then you may be better off applying for a debt consolidation loan. A loan isn’t always the best idea if you are already in debt as it will increase the amount you owe, however, this will stretch the payments out over a longer period.
Voluntary trust deed
A voluntary trust deed is an agreement between debtor and creditor to repay a portion of the amount owed. Any assets will be given to a creditor in order to raise funds and a direct debit or portion of income will be paid for up to 3 years.
Debt relief order
A debt relief order or DRO does exactly what it states, it provides debt relief. This is an alternative for those who are in less than £15,000 of debt but do not have any assets to seize and sell. This order will last a year, a time in which no attempt on reclaiming the owed money can be made without going through the court.
After a year if your circumstances have not changed and you can still not pay up then you will be freed from the debt. A DRO can be arranged with an Insolvency Service in partnership with an intermediary.
Debt management programme
This is an arrangement between parties to pay off the debt over a fixed period of time. You must be able to make these payments or the programme may be scrapped and another method of repayment sought.
Individual voluntary arrangement
An individual voluntary arrangement or IVA is a great alternative to bankruptcy if you own your own property, business or you want to avoid the negative social impact that may come with bankruptcy. This legally binding agreement will see payments made on a regular basis.
If you own your own business then you may also benefit from raising capital via broker invoice factoring. Collecting all the money owed to you may pay off anything you owe effectively cancelling out the debt.
Have you seen a solution to your business debt in this post? If you need any advice or guidance about any of these issues then get in contact with us today.
Article By Ben Lloyd
January 8th, 2014
Ben is the Director and Co-Founder of the Pure Group and Managing Director of Pure Property Finance.
Following a career in Barclays, where Ben was in the real estate finance team for 8 years, he decided that the market needed a more forward-thinking type of commercial brokerage so founded Pure Commercial Finance (now Pure Property Finance), the first company within the Pure Group.
Ben has extensive experience across the real estate sector and has participated in over £2bn of real estate transactions during the course of his career.
Ben oversees the general strategy at Pure Group and works with the senior leadership team to drive the Group forward. Ben is also on the Executive Committee of FIBA.See more articles by Ben