We’ve all been there, one day we are in the black and getting client requests daily and then next we’ve lost our biggest client and the debtors are knocking on our door. If you live in the UK, here are three ways you can recover from a devastating loss in your business.
1. Create a Debt Management Plan
This is an agreement between you and those companies and persons you owe money to. This is the best path if you can afford to pay off your debtors over time with a small amount every month and even though you have debt problems, you can make several payments like this every month.
You spend the time and effort to contact and negotiate with every debtor or you can use a debt management company if you are willing to pay them a fee also. If you use a debt management company, you arrange on regular payment per month and the company splits the money between your debtors.
2. An Administrative Order has been set up
This is a way to deal with debt if you already have a court order or high court judgement against you and you are unable to pay that order in full. The requirement for this is that the debt must be less than £5,000, you must have at least two creditors on the order, and you must have a judgement against you.
You are required to make one payment every month and the court divides that out among your creditors listed on the order. This does NOT take into account any debts that are not on the court order, so can be troublesome if someone else decides to ask for judgement.
3. An Individual Voluntary Arrangement
This agreement is similar to the others above except that you go through an insolvency practitioner. It’s the last step before bankruptcy and is quite lengthy in its process. Your insolvency practitioner comes up with a plan that you can afford to repay and how long it will take you to repay it. You have turned over all the details of your financial situation and they decide what’s best for a repayment plan. They also contact your creditors and will take effect when seventy five percent of your creditors agree to the terms.
There is usually as set-up fee and a handling fee each time you make a payment.
4. Debt Relief Order
This final route is one way to deal with what you owe if it’s more than £20,000, you don’t have any extra income to pay, and you don’t own a home. The benefits of this route is that you don’t have to pay back any of your creditors and they can’t recover any of the debt owed without the court’s permission. You are usually discharged from your debt after one year. There are many places to help you with a Debt Relief Order, including Carrington Dean – Debt Relief Order, and others. Once you qualify for the DRO there are some restrictions. You are not allowed to borrow more than £500 without telling the lender about your DRO. You are not allowed to act as a director of a company. You are also not allowed to create, manage, or promote a company without the court’s permission. And, finally, you’re not allowed to manage a business without telling those you do business with about the DRO.
If you live in the UK, it’s important to know your options to recover from overwhelming debt should the unthinkable happen or tragedy strikes.