By Gary Pettit
PBC Business Recovery & Insolvency
HOW many readers find themselves looking at how much to pay in order to service personal debt every month after you have just been paid? In some cases that level reaches a point where it simply cannot be managed, where you then start to notice those road-side signs that promise to write off 90 per cent of your debt a little more.
Some will ignore those assurances and seek advice early. This could result in an application for your own bankruptcy, where others will consult with an insolvency practitioner (IP) with a view to entering into an individual voluntary arrangement (IVA). An IVA is, in laypersons' terms, a deal with your creditors that is regulated and is a settlement in full and final satisfaction of your liabilities. Indeed, over the past six years, IVAs have consistently outnumbered the number of bankruptcy orders, demonstrating more people are looking to resolve their debt burden.
However, a far greater majority of people look towards debt management plans (DMP) as their solution. While I have my own misgivings, for many people a DMP works and they get themselves back on a level footing. Unfortunately, I have also seen many where it does not work and those people end up going bankrupt or, in some cases, enter into an IVA.
One issue that arises with companies who offer DMP is the lack of insolvency-like regulation. Every IP has to be licensed through a professional body and is regulated by statute, their professional body and the Government through the Insolvency Service. IPs also have professional guidelines to follow and are insured, so there is recourse if things go wrong. If you are wondering why you should take heed of this fundamental difference then you only have to look at the recently reported case of Gregson & Brooke Financial Services Limited and One Tick Limited.
Both Gregsons and One Tick offered a debt management service where clients would pay into a DMP. Clients complained to the Financial Conduct Authority (who governed both companies) that despite paying into their DMP their debt was increasing. After some initial enquiries by the FCA both companies went into administration, after which it was discovered the directors had withdrawn some £652,000 of client money for their own benefit. While all four directors have been disqualified as directors, the true victims are the debt-ridden clients who now find they are in deeper financial trouble than before, despite making significant debt repayments; payments that would have been covered by IP insurance under a formal insolvency procedure.
The Association of Business Recovery Professionals has been so concerned with this (growing) problem that they have published two guides: 'Don't be misled by advice from an unlicensed advisor' and 'My business is in financial difficulty'.
In short, if you find yourself in a position where the ability to service your debt is getting to (or has reached) a point of no return, seek professional advice from an IP. With most practices, the first consultation is free of charge and could save you a lot of stress, anguish and, like the poor victims of the above companies, expense.
If you are in financial difficulty and require advice or assistance, then contact PBC Business Recovery & Insolvency to discuss your situation. Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially and arrange a free initial consultation or visit www.pbcbusinessrecovery.co.uk for further information.