Informal arrangements

An informal arrangement is similar to a CVA or IVA, but does not involve supervision by an Insolvency Practitioner. It requires 100% approval of the creditors, so is rarely a suitable tool if there are large numbers of creditors to contact.

To set up an Informal Arrangement, creditors must be circulated with a payment proposal. Normally, this would involve a one-off up-front payment of a proportion of the debt in full and final settlement.

The communication with the creditors must be carefully worded for the Arrangement to be binding and it must be clear that the Arrangement is in full and final settlement of the total debt.

There are many companies now offering debt management services which could be considered a form of Informal Arrangement. However, these companies in the main merely act as an agent to collect cash from you on a monthly basis and, after deducting their fees, pass on a proportion of this to your creditors. often over a very long period. There is no obligation on the creditor to freeze interest and other charges, or to settle for a lower sum. In the end, many such arrangements fail and the company or individual is eventually forced into Liquidation or Bankruptcy.

Informal Arrangements are useful if there are few creditors, all of whom are likely to be willing to accept a sum lower than the full debt. We recommend such arrangements only in these circumstances.

We find that Informal Arrangements work best in circumstances where, for example, a director has been caught up in a personal guarantee of the company’s liability to (say) its bank. We are often able to negotiate with the bank directly to reduce the total claimed or to spread the payment over time.

For individuals who owe substantial sums to a small number of creditors, the same methods can often apply.

The service we offer in these circumstances is:

Negotiation with the creditor(s)

Preparation of the legal paperwork, including a statement of affairs and a formal offer

Circularisation of the creditors with the offer of settlement

Follow up of the offer to encourage settlement

Payment of the settlement sum from funds deposited with us for that purpose

You can negotiate deals with your creditors yourself, but we would advise you to take advice to maximise the benefit and to ensure that the creditor(s) cannot change the arrangement later to suit themselves

Debt and Bancruocy adviceBankruptcy – a complete guide to IVAs and business bankcrupcy

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