FOR INDIVIDUALS
Informal Arrangements
If homeowners are struggling to meet their mortgage payments, three month payment holidays are available on mortgages. Speak to your mortgage company about putting a holiday in place.
Similarly with credit cards, loans, council tax, utilities etc people are being given temporary payment breaks and/or reduced payment plans.
Look at your income and expenditure and write it down. Whilst this might sound simple, when people write down their expenses, they often quickly see where they can make savings!
Formal Arrangements
If the above steps aren’t enough, speak to an Insolvency Practitioner about an Individual Voluntary Agreement (IVA) in the first instance.
If someone has debts of less than £20,000, assets of less than £1,000 and disposable income of £50 or less each month, they could apply for a debt relief order which is a 12 month debt forgiveness programme that, once concluded, rids the debtor of their debts, in the same way an IVA or bankruptcy would.
Last case scenario… bankruptcy is an option and the Insolvency Service is still open to process debtor petitions.
Before any of the above steps are taken though it’s important to speak to a Solicitor or an Insolvency Practitioner as which option is the right one will vary from case to case.
FOR COMPANIES
Informal Arrangements
Look at income and expenditure again. Consider who your key supplier relationships are and who will allow payment breaks. Our clients have had lots of success with understanding suppliers – pick up the phone and talk. If someone goes quiet on a supplier / creditor, that is where they will get suspicious and problems will follow.
Look at your staff – who is essential and consider who should be furloughed.
The Government are also offering VAT deferment, delays to the filing of accounts and business interruption loans. Clients should speak to their professional advisors (lawyers, accountants, funding brokers) to explore all of their options.
Review your own debtors – who owes you money? What debts are overdue? Can you shake that tree to get some much needed cash in? Everyone will be struggling right now but that doesn’t change a debtor’s liability to pay.
Formal Arrangements
If the company just needs some breathing space and can trade through this with the agreement of their creditors, a Company Voluntary Agreement (CVA) may be appropriate. This can be structured across up to five years to give the breathing space that is required.
It’s important to remember that Administration is a recovery process and not one designed to kill a business. If there is a viable underlying business that is strangled with debt, a Pre-Pack Administration may be appropriate to keep the good bits of the business and leave the negative behind. Pre-packs also preserve jobs!
If the company just cannot survive, Liquidation is still an option and can be processed by an Insolvency Practitioner. Before liquidating, the directors need to be careful with making certain payments. If they have recently made payments to themselves or connected companies at a time when insolvent, the director would face personal liability.
Speak to your professional advisors early
In these unprecedented times, balancing debts and cashflow may be very challenging. For any clients experiencing financial issues due to the coronavirus, we are here to help, advise, and can signpost you to the best support. Please contact us on 0845 287 0939 or email: info@farleys.com.
