Financial Struggles and Creditor Pressure – What You Need to Know

NEWS & BLOG

NEWS & BLOG

If your business is facing financial difficulties, this can be a very stressful time on its own without the added issue of facing pressure from your creditors. Whether you’ve had a County Court Judgement (CCJ), a Winding-up Petition or you’re facing pressure in another way, here are our guidelines on how to deal with it.

CCJs and Winding-Up Petitions
A CCJ is issued when the Court determine that an individual or company owes money to a creditor. The process starts when a creditor applies to Court to make a formal Claim, this Claim is sent out by the Court and you will have 14 days to respond with the necessary paperwork. If you fail to do this, a CCJ will then be issued in default. If you file a defence, the Court will ultimately determine the outcome of the Claim.

Once a CCJ is granted, it will be marked on the business’s credit report and, unless the debt is repaid within one month, this can affect credit ratings making it difficult to secure finance and credit in the future.

If a business fails to pay following a CCJ, a creditor then gets access to further remedies including the ability to issue a Winding-up Petition. This is the most serious legal action a creditor can take. If still nothing is done about this, the petition starts a series of events that will affect your ability to trade, and it can ultimately mean the end of your business.

Once the petition is served, you will have seven days before the company’s financial situation becomes public knowledge. A court hearing date will be set to decide whether a winding-up order should be granted. If it is, then the liquidation process will begin.

Receiving a Winding-Up Petition
You will have received a Winding-up Petition because your company is deemed to be insolvent due to the non payment of the outstanding debt. At this stage, there are still plenty of options. The petition has been most likely been issued by a creditor as their last resort in trying to get paid. However, there are cases where creditors will issue a Winding-up Petition in an attempt to make their debtor pay quickly. We recommend that you seek immediate advice on how to deal with this if you believe this to be the situation.

What types of creditors take this action?
Trade suppliers, banks and HMRC most commonly use this procedure. It’s important to note that the cost to the petitioner is significant, and so this action is likely to only happen if they feel there is no other option. The consequences are very serious for the company involved and there is limited time to act, but there are still things you can do. Getting advice from an experienced Insolvency Practitioner is the best place to start.

What happens with a Winding-Up Petition?
The court will set a date for the hearing and then a decision will be made on whether to grant a Winding-up Order. If an order is granted, the Official Receiver (OR) or another liquidator will be appointed to take control of the company’s affairs and assets. The assets will then be liquidated for the benefit of the creditors.

Other pressures from creditors
If a creditor been has unable to collect a debt, they may choose to involve a debt collection agency, or even sell the debt to a third-party. Whatever the size of debt, you shouldn’t have to live in fear of the pressure of repetitive repayment demands. If a creditor crosses a certain threshold, they could be guilty of harassment. If you are feeling excess pressure, then please seek advice from a business recovery specialist.

Resolving issues with creditors
Ultimately, the most important thing to the creditor is to ensure it receives its money. Therefore, one of the best ways to resolve this is to negotiate a mutually beneficial repayment arrangement. This will give you some breathing space whilst providing the creditor with some assurance that the debt will be repaid.

If you are unable to come to a reasonable agreement with your creditor, you may find it beneficial to seek the assistance of a licensed Insolvency Practitioner where you will be given the best advice and support.

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