Business Debt

If you own your own business we could help you:

- Reduce repayments to creditors.

- Stop interest and charges.

- Help you to continue to trade.

- Avoid bankruptcy.

Case Study

Martin contacted last year; he owns a video rental shop and had seen a decline in his business due to the availability of movie downloads on the internet.  Martin had €30,000 in credit cards and loans; he also had €13,000 outstanding of tax and VAT.  Martin knew that he had more going out than he had coming in and thought he was going to have to declare himself bankrupt because he couldn’t pay all his bills on time.  When we spoke with Martin we could see that if he could reduce his repayments to his creditors he could still trade and make a reasonable income, so we reduced his creditor repayments from €1050 to €400 per month.  We also helped him to make a payment arrangement with his tax and VAT, so within the space of 30 minutes we were able to give him an option that improved his cash flow and helped him avoid bankruptcy.

This is similar to a Personal Debt Management Plan and operates in much the same way. Once we have evaluated your income and expenditure, and established a repayment plan which you can reasonably expect to manage, we will negotiate with your creditors. Even if you have court judgements, we can renegotiate these problems and get court approval on the amount you have been ordered to repay.

Generally, your creditors will also stop chasing you for the payment, and will liaise directly with us. It is also possible to have interest and charges frozen, while you regain control of your finances.

Best of all, a debt management plan is flexible, and allows for unforeseen circumstances to be taken into account, should they arise at a later date.

Formal Scheme of Arrangement (FSA)

FSAs are very rare inIreland due to the costs of High Court proceedings, they are difficult to arrange and used mostly by businesses with considerable debt. The costs of an FSA are similar to those of bankruptcy proceedings inIreland (Up to €30000). If a court-approved formal scheme of arrangement is accepted by 60% (by number and value) of the Creditors, the remaining 40% are legally bound by it and cannot take any further action against the Debtor.

The Debtor completes a petition for protection to the Court with an affidavit setting out their financial background and reasons for their difficulty. The scheme allows for the Debtor to repay their debts at an affordable amount. A portion of the debt can also be written off. Unlike bankruptcy, the Debtor can still trade and carry on his business and the FSA is not advertised in the press.

Only 10 FSAs were approved by the High Court inIrelandin 2010, and for the reasons above, they are particularly risky to even attempt. If an application to the court to approve an FSA fails, ie. less than 60% accept, the Debtor will be made bankrupt immediately.

Informal Scheme of Arrangement (ISA)

This arrangement is suitable for Directors and Investors who have given personal guarantees to banks or trade creditors, Sole Traders etc. facing bankruptcy.

If a Debtor needs time to sell assets in order to pay debts in full, then Creditors will usually agree not to take legal action to allow time for the assets to be sold however, where a debtor cannot discharge ALL of his debts, an Informal Scheme of Arrangement can be proposed. In this Scheme of Arrangement, Creditors agree to accept a portion of the debt in full and final settlement of the debt. Creditors will usually accept a scheme of arrangement if they are to receive a better return over a shorter period of time than in bankruptcy.

Examinership

An Examiner is appointed by the Court when the High Court is satisfied that the Company has a reasonable prospect of survival, that it is viable or that it can be made viable. The petition can be presented by the Company, its Directors, a Creditor (including an employee) or Shareholders holding at least one tenth of the shares. The Directors remain responsible for the daily running of the company. The task of the Examiner is to examine the company affairs and formulate a scheme of arrangement. If unsuccessful, the company will be placed into liquidation and the company’s bankers may appoint a Receiver.

Company Voluntary Liquidation (CVL)

The Directors and Shareholders ‘voluntarily’ place the Company into liquidation. A meeting of Creditors takes place when the Creditors appoint a liquidator of their choice.

Company Liquidation

This occurs when a Creditor petitions the High Court to appoint a Liquidator when they are seeking payment for money owed. This is also known as a Compulsory Liquidation or Winding Up Petition.

Bankruptcy

Legislation in Ireland is very out dated and draconian. Despite recent changes to bankruptcy laws, in bankruptcy a Debtor will not be discharged for 5 years (previously 12 years) and even then, the bankrupt must have paid off all the costs of the bankruptcy, which are substantial, sometimes up to €30,000 and have paid off around 50% off all previous debts. Creditors would usually prefer the Debtor to repay by any other means. InIreland, bankruptcy is a life sentence. The only real solution to personal debt and debts from self-employed people, is a Debt Management Plan.

Depending on your circumstances, bankruptcy tourism may be an option. This involves re-establishing yourself in another EU state, where bankruptcy laws are more relaxed. In many cases, theUKis a destination of choice. It involves establishing you centre of main interest (COMI) in that country, and then petitioning for bankruptcy. It takes 6-12 months to establish yourself there. It is not a simple solution, and will not be suitable for everyone, as it basically means relocating to theUK. This should only be considered in extreme cases, for example where high levels of debt and/or negative equity is involved.

You declare your bankruptcy to the Official Receiver, and declare all of your debt, including all Irish-based debt. The Official Receiver will then assess your circumstances. You cannot borrow any further money and would have to declare any changes within your circumstances to the official receiver during this year. You may be asked to sell valuable assets, but you are able to keep most of the things you need for day-to-day living.

If you have disposable income from employment or benefits in the UK(over £50 per month), you will also receive an Income Payments order, which will last for three years. You can be discharged from bankruptcy within 12 months, and once your petition has been accepted by the Official Receiver, your creditors write off your unsecured debts. This allows you to have a fresh start. If you do have an income payments order against you, this must be maintained for the three years.

The bankruptcy which is accepted in theUK, under EU law, must also be accepted by your Irish creditors. In England and Wales bankruptcy fees total £700. You pay a £175 fee to the court and £525 to the Official Receiver. If you have a low income or receive benefits, you may be exempt from the court fee allowing you to go bankrupt for £525. It is less expensive inNorthern Ireland.

To find out if this could be an option for you, please call us on Lo-Call 1890 987 857 or 048 4175 2062