Business debt case studies

If you run your own company it might help to know that others have also struggled with business debts, and PayPlan have been able to help. The following are real case studies featuring PayPlan clients…

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1. Business Case Study – Mike

Mike was in paid employment earning a good salary. In an effort to advance his career he changed jobs but the company he went to work for never fulfilled its promises and he was eventually made redundant whilst he was on holiday.

Although this was a very stressful time for Mike he decided to set up in business for himself, initially in sales. However the companies to whom he contracted did not pay on time and he found himself without a regular income with the bills piling up.

Mike changed his business strategy and his business began to go from strength to strength. However, even though the business was now successful he was still unable to repay his credit commitment from the income he earned.

PayPlan’s Insolvency Practitioners arranged a monthly repayment plan by way of an IVA or individual voluntary arrangement. This allows him to make payments which he can afford and crucially, allows flexibility for quiet trading periods.

2. Business Case Study – Christine

Christine ran a successful company providing websites and computer software which won many awards within the computer industry. However, the company was dissolved due to a lack of commitment from other directors. Christine decided to continue in business as a sole trader.

She took out business loans, which were taken out to fund ongoing trading and cover her employees wages. Cash flow was poor however there was the prospect of large contracts being awarded and so Chris was not unduly worried. Unfortunately one very large contract was badly quoted for which meant that the business incurred a significant loss on this deal.

Christine was forced to make some staff redundant as she could no longer afford the wages, although some had to be retained as they were necessary to complete the unprofitable contract. It was at this point that the Inland Revenue presented a petition for bankruptcy.

Bankruptcy would severely affect Christine’s ability to continue in business as contracts are of a long duration and she would need to be able to take deposits. It is an offence for an undischarged bankrupt to take credit (definition includes deposits) without disclosing the fact that he is an undischarged bankrupt. This would not have helped her business as most of the contracts were with large financial institutions. It was at this point she was recommended to contact us for an alternative solution.

We assisted Christine in the preparation of repayment proposals to all her creditors, including the Revenue in the form of an individual voluntary arrangement. Her offer was accepted and she was able to continue trading without the restrictions of bankruptcy.

3. Business Case Study – John and Mary

John and Mary are taxi drivers. They got into financial difficulties due to a down turn in local business because of increased competition from other taxi firms.

Their only asset was their mobile home which was owned outright and they had no surplus income after paying all their household bills and living expenses.

Though bankruptcy was the best option for them they felt that they would like to have the opportunity of making an offer to their creditors.

They realised that if they went bankrupt they could lose their home anyway and so decided to sell the property and offer some of the funds to their creditors in full and final settlement.

The arrangement allowed them to keep some of the cash realised from the sale. In bankruptcy, all of the monies could have been claimed by the Trustee.