Nick Payne, Insolvency Practitioner
By Nick Payne, Payplan’s Senior Insolvency Practitioner

If you are a Company Director you may be struggling with debt for a variety of reasons; perhaps a major customer has gone under owing you a lot of money or maybe customers are not buying as much as they used to due to the current economic climate.

A recent study of small companies found that one in every four is struggling to pay their debts, so you are not alone.  To help support your business you may have taken out personal loans to give your company a cash injection, or the bank may have asked you to personally guarantee their debt which means you will be asked to make the monthly payments if your company does not.

The debt solutions available to you will depend on whether it is viable for your company to continue trading.  This will largely depend on whether your company is able to make monthly payments to its debts.  If you are unsure it is best to seek advice from a licensed Insolvency Practitioner.

You should seek advice as soon as you think you or your company is going to be in difficulties.

If you wait until payments are missed then it will lead to more interest and charges being added which will increase the amount owed and may also result in creditors taking legal action. Seeking advice early may also avoid bankruptcy.  In bankruptcy you can no longer act as a Company Director without leave of the court which may mean your company cannot continue trading.

If your company can meet its debt payments but you have personal debts, you may need to consider a personal solution, such as an Individual Voluntary Arrangement (IVA) or a Debt Management Plan (DMP).  These solutions will allow you to reduce your debt payments to a level you can afford while protecting your home and your company and allowing you to continue trading.

If your company cannot afford to make its full monthly debt repayments but can afford a reduced payment then it may be possible for your company to enter a Company Voluntary Arrangement (CVA).  In an IVA or CVA you pay what you can afford, normally over a five year period.  After this the remainder of the debts will be written off.  Interest and charges would no longer be added to your debts and legal action would be stopped.

If your company is unable to continue trading, then you can put it into liquidation, where the company’s assets are sold to pay its debts and the company is then closed down.  Alternatively, one of your creditors may apply to put your company into Liquidation.   If you also have personal debts you may need to consider a personal debt solution; by seeking advice early you may not be forced into bankruptcy, but instead you could instead enter an IVA or a DMP which should protect any personal assets.

If you are struggling I would recommend seeking free, confidential no-obligations debt advice at the earliest opportunity. You do not have to proceed with any of the options discussed; however by seeking advice, you will be better informed of the solutions available.