In some circumstances individuals or companies that are unable to pay all amounts which they owe to creditors may be able to negotiate debt settlements or arrangements with some or all of their creditors in order to avoid bankruptcy or liquidation.
Pearce & Heers specialises in assisting to negotiate these types of debt settlements and informal arrangements. The approach we commonly adopt is we provide creditors with a full summary of an individual’s or company’s financial position often with an estimate of the position should that party enter into a formal insolvency appointment, which assists creditors understand that a person or company cannot pay their debt in full. We will then generally make an offer of settlement to creditors on that person’s or company’s behalf and subsequently liaise with their creditors regarding the offer, any counter-offer received and if negotiations are successful in preparation of a settlement agreement.
When creditors understand an entity’s financial position and the prospects of recovery should that entity enter into a formal insolvency appointment, they may often be open to negotiating a settlement of their debt for a lower amount, reducing the interest on their debt for a period, or allowing deferred payment of their debt.
Informal arrangements can be proposed quickly and efficiently, however they require acceptance of the proposed settlement offer by each of a person’s or company’s creditors (or possibly the vast majority of creditors) to be successful. If one or more creditors reject a proposed offer the informal arrangement may not be able to proceed. Consequently, proposing such arrangements is more difficult as the number of creditors increases.
Additionally it is generally more likely for this process to be successful if a person or company is able to make an offer to creditors for a significant portion of their debts, although this may not always be necessary.
In considering whether to undertake this process, company directors and individuals must be aware that not all such informal matters will result in a successful outcome, however, it may be a better strategy than an immediate formal insolvency appointment.
If you would like to discuss the options available to you, including negotiating informal settlement arrangements, please contact us for an initial obligation free consultation.
Dispute Resolution and Debt Settlements
We are often approached by individuals or companies that are subject to legal claims or proceedings, or those parties’ solicitors, in circumstances where the individual or company is unable to continue funding the litigation or meet the amount of any judgment which has been obtained or which may be obtained in the future.
Pearce & Heers specialises in assisting individuals and companies resolve litigation and disputes with a commercially-minded approach, which may often benefit both parties to the dispute. As with the negotiation of general informal arrangements with creditors, we commonly do this by providing the other side to a dispute with a summary of an entitles financial position, along with details of any estimated future costs to that entity of defending claims against it and a summary of estimated outcomes should the entity we are acting for be forced to make a formal insolvency appointment.
Whilst there is obviously no certainty of achieving a settlement through this process it provides a further option for parties who are subject to litigation to consider in circumstances where they cannot afford to continue to fund the litigation or meet the amount of any claim against them and it may result in settlement of disputes on commercial terms.
Examples of Arrangements and Debt Settlements we Have Assisted with
We have recently successfully assisted numerous individuals and companies enter into informal arrangements and settlements with their creditors, including in respect of the following matters:
- Assisting a large transport company negotiate its 9th payment arrangement with the ATO in respect of debts totalling several hundred thousand dollars, which included the ATO writing off a portion of the interest and penalties which it had charged the company.
- Assisting a group of civil contracting companies negotiate a payment arrangement with the ATO which resulted in the ATO withdrawing a winding up application which the ATO had filed against one of the companies.
- Assisting a company’s directors negotiate a payment arrangement (from the company) with the ATO in respect of amounts claimed by the ATO, totalling several hundred thousand dollars, which the ATO was claiming against the company and its directors as a result of Director Penalty Notices issued.
- Assisting three partners of a partnership negotiate settlements with their former landlord, substantial supplier and one other creditor.
- Assisting a company and its director negotiate a settlement with the company’s former landlord in respect of a debt owed to the company’s landlord which was for an amount of several hundred thousand dollars and which the director had personally guaranteed.
- Assisting a number of parties negotiate settlements in respect of legal claims being pursued against them, which the parties could not continue to defend given the significant legal costs involved.
- Assisting a debtor negotiate a settlement with a creditor who had commenced bankruptcy proceedings against them for a debt which the debtor could not pay.
- Assisting a number of parties negotiate settlements with their banks in respect of shortfalls suffered by the banks upon sale of properties subject to their securities.
- Assisting a number of property developers in negotiations with secured creditors such that the secured creditors agreed to stay enforcement action to give the development companies time to conduct an orderly sale of properties subject to security.