If your company has fallen into arrears and creditors are demanding repayment, it can be incredibly stressful. Although it may be tempting to buckle under the weight of creditor pressure, there are steps you can take to stop creditors harassing you and give you time to formulate a plan to repay your debts.
Pressure from creditors
Creditors can pressure a company to repay its debts in several ways;
- Contacting your business via telephone, email or post, reminding you to repay your debts.
- Sending debt collectors to your business premises.
- Issuing legal demands, such as a County Court Judgement (CCJ) or a Statutory Demand.
What are my rights?
Although creditors are entitled to request money you owe them, they must act within the law and are not allowed to harass you. Creditors cannot force their way into your property, nor can they demand more than you owe, and they shouldn’t turn to criminal acts to recover their funds. In extreme circumstances, and if you suspect they are breaking the law, you should contact the police.
If the debt is related to your company, your creditors aren’t allowed to come after your personal assets. The limited liability included in a limited company will protect these assets, and they’re off-limits from your creditors.
What are my creditor’s rights?
Creditors can seize assets or property if they have been used to secure the loan, and they can also employ the services of bailiffs. Bailiffs have a set of rules themselves which they have to adhere too and will only be employed after the creditor has applied for a CCJ.
Creditors can send reminders for overdue payments, which can come in the form of emails, telephone calls, written letters, or a mixture.
What if you have personal guarantees?
As the director of a limited company, your personal finances are separate from your company’s. If you have provided personal guarantees for finance and loan agreements, the limited liability is bypassed. Depending on the financial terms, If the company falls into debt, the creditor can activate the personal guarantees and claim what they’re owed from your personal finances.
What can’t creditors do?
Although creditors are within their rights to remind you to repay what you owe, there are certain actions off-limits to them that you should watch out for. Calling your home at all hours, messaging via social media, or applying legal force they don’t possess, would be classed as harassment.
If you think your creditor has overstepped the mark and is unfairly harassing you, you can try complaining directly to them. Ask to speak to a senior employee and make sure you have some detail to work from; make a note of the times of day you have been approached and the names of those who have unfairly pressured you. Tell them how you want to be contacted and ask for confirmation in writing that they will adhere.
Dealing with creditor pressure
If creditors are putting pressure on you to repay your debts, or you’ve noticed an increase in the amount of pressure they’re putting on you, there are options open to you to alleviate or lessen it.
Talk to your creditors
Making contact with your creditors is a much better option than choosing to ignore them. Facing creditors head-on and opening a dialogue with them is a good course of action and allows you to negotiate. Depending on who the creditor is and how much you owe, there are both formal and informal payment plans you could take up.
If you have the option to pay off all or some of the debt, it’s important to do so as soon as possible. Similarly, if you have a set period by which you are confident you can pay them back, suggest new terms. It might not be accepted straight away, but it gives you the option to negotiate. Opening the dialogue is a much better way of dealing with the problem than ignoring things.
If the majority of the debt is owed to HMRC, you can apply for a Time to Pay Arrangement (TTP). This is an informal arrangement that allows a business to repay HMRC over 6 – 12 months. You will have to apply for a TTP, which HMRC will have to approve before it comes into force. As the agreement is informal, HMRC can cancel the arrangement at any time.
Speak to the authorities
If you’ve received a CCJ, you can apply to the court to have it set aside if you feel you shouldn’t have to pay it.
Although the police won’t intervene if you’ve received reminders to repay your debt, they may get involved if you’ve received a criminal level of harassment, such as threats to life. They can also become involved if bailiffs visit your premises outside of their rights and refuse to leave.
The Financial Conduct Authority possesses the ability to refuse or revoke a creditor’s authorisation and has strict rules and guidance relating to debt collection. They can’t take up your individual case, but if you believe that your creditor has acted wrongly, they will listen to your story and will act accordingly if the creditor has fallen foul of their rules. If the creditor refuses to co-operate and is part of a professional body, you should contact that organisation and see if they’re breaching the code of practice.
If creditor pressure is threatening the future of the company and it has become insolvent, you may be eligible for various insolvency agreements. These agreements could include a Company Voluntary Arrangement (CVA), which allows companies to repay what they can afford over up to five years. The directors will remain in control of the company for the duration of the arrangement.
If the debt is so crippling that the business can’t continue, or you just want to close up, you can apply for a Creditors Voluntary Liquidation (CVL). Effectively closing the business and ending all creditor pressure. Closing the company voluntarily is preferable to receiving a winding-up petition, which forces the company into compulsory liquidation.
Alternative funding options
If you believe the business model is sound and could potentially trade its way out of trouble, refinancing could be a viable option. There are alternative funding options such as invoice finance, asset finance and commercial finance. However, any lenders who offer these products also have to believe in your business and the clients you work with. If gaining additional funding helps the business, as you pay creditors, it will ease the amount of pressure on you.
If creditors have already filed for CCJs or sent round bailiffs, then refinancing would not be a viable option. If creditors have already been waiting for repayments, they are unlikely to wait even longer as the business trades out of trouble with no guarantee they will receive anything.
If paying your creditors isn’t an option, it’s unlikely that pressure from them will ease up. Creditors will push forward to secure what they’re owed. First issuing reminders, CCJs and sometimes even resorting to bailiff action. There are commercial finance and formal payment plans available, which can be arranged with creditors, but it’s usually only the case if the business has a genuinely viable future.
How we can help
If creditor pressure is holding your business back or you believe that creditors will be taking action against you, the faster you act, the better. We can help talk you through the options available to your company, stop creditor pressure, and if possible, help you come to the most suitable agreement with any creditors. We offer free face-to-face consultations, and we operate nationwide.