How to deal with your creditors informally

In circumstances where the level of your overall debt means that you are struggling to make repayments as they fall due advice from a specialist insolvency lawyer, whether a solicitor or a barrister is essential.

There are occasions however where an informal arrangement may be much preferable to a formal procedure, such an Individual Voluntary Arrangement (“IVA”) or bankruptcy.

Often, the first thing to consider is who should “front” the discussions with your creditors. If what you seek are extended terms for repayment, or some level of debt forgiveness, the creditor may think that you have more money than you are disclosing if you instruct lawyers or other professional advisers to represent you in those discussions. There will obviously be other circumstances where a creditor would expect to see such professionals instructed on behalf of the debtor.

The flexibility of a private arrangement can often be attractive to the creditor who may in fact receive a greater percentage of the debt than if a more formal insolvency procedure was selected. In a bankruptcy the creditor may receive a nominal percentage as a dividend or a much lesser sum in an IVA.

The advantages to a private arrangement include some of the following –

 

• Reduced publicity
• Not as expensive
• For the debtor there is flexibility to agree instalment levels and timing of payments
• There could be better returns for the creditors
• The creditor can always take enforcement action in the future

 

Unsurprisingly, not all is plain sailing. There are some pitfalls, such as –

 

• From the debtors point of view he remains at risk because the creditor can take enforcement action at any time
• There is no moratorium while the new terms are hammered out
• An unscrupulous creditor may bring about severe hardship over a longer period of time for a debtor who may be better in bankruptcy

 

Therefore, seek the advice of a specialist bankruptcy lawyer without delay to consider all of your options.

 

Call Stephen Chinnery on 07460 005 769 to discuss further.  Stephen Chinnery is a specialist insolvency disputes lawyer.  He is a solicitor-advocate who is able to represent your commercial interests in every civil court in England & Wales.