How We Used a Debt Arrangement Scheme to Save a Client's HomeFebruary 15, 2018
To help illustrate some of the work we do in helping people avoid insolvency while still dealing with financial difficulties, I have written up two case studies on Debt Arrangement Schemes (DAS) we designed and oversaw for a few of our clients.
I have detailed the circumstances preceding our work, the potential outcomes without a DAS and the actual results we achieved in each case.
I hope this gives some insight into positive results we can achieve for our clients through a Debt Arrangement Scheme.
Case Study #1 — Law Firm
A Scottish law firm entered administration and was subsequently closed down. During the firm's struggles, the partners had signed significant personal guarantees for the law firm’s borrowing.
With the firm insolvent, its creditors began to pursue the partners personally to recover their debts and sequestration actions were imminent.
So not only were the partners now without a job but they were also personally liable for significant debts.
If you sign a personal guarantee for a business debt, you become personally liable for that debt should be business be unable to repay it. So with the law firm closed down, its creditors were strongly pursuing the partners for the debts they personally guaranteed. Intimation of legal action and bankruptcy had been received.
In this case, the debts were substantial and the law firm’s former partners stood to lose their homes and potentially their ability to fully practice if they were to be sequestrated.
Thankfully, the partners contacted 180 Advisory Solutions early enough that we could help them. We worked quickly and efficiently to design a DAS and seek approval from their creditors.
The sequestration actions were stopped and the DAS proposals were approved. While a number of creditors did object to the DAS proposals, they were ultimately overruled by the Accountant in Bankruptcy.
The DAS proposals allowed the solicitors to repay all their debts over an extended period of time and provided the partners with much-needed breathing space while they worked to rebuild their careers.
The DAS froze all interest, fees and charges on the debts, meaning the partners will only pay what they originally owed, rather than a figure inflated by years of added interest payments.
Ultimately, we helped the partners avoid insolvency and save their homes. We also worked closely with the Law Society of Scotland to ensure all partners could retain their practicing certificates and continue working as solicitors, including acting as the senior partners of a new law practice.
It's also worth pointing out that the partners' creditors will recover far more of what they were owed through a DAS than if the partners had ended up in personal insolvency.
Case Study #2 — Oil & Gas Industry Supplier
Two business owners contacted us after their company went into liquidation. The company, which operated in the oil and gas sector, had suffered due to the well-reported downturn in that industry.
The business had been struggling for some time and the two directors had personally borrowed and personally guaranteed very significant sums, hoping they could survive the industry downturn.
Unfortunately, the company didn’t survive and its creditors began demanding the repayment of these borrowings.
To make matters worse, some of their personal borrowing was done via credit cards, with very significant rates of interest now accruing.
Like in the first case study, the directors had made themselves personally liable for company debt that they were unable to repay quickly.
They were facing imminent sequestration court actions and their homes were at risk as they had equity but were unable to remortgage due to their current income situation
The pair came to 180 Advisory Solutions and we quickly put a DAS in place for each of them.
As before, the DAS froze all interest, fees and charges, protected the businessmen from legal action by their creditors and gave them an extended period of time to repay their debts.
The DAS helped the pair avoid insolvency and also protected their homes. It also resulted in a significantly better recovery rate for creditors than sequestration.
Could a DAS Help You?
If you have personal debts and are under pressure from your creditors, a DAS may be the solution to help you avoid insolvency.
As I mentioned above, a DAS will freeze all interest, fees and charges related to your debts and give you an extended time to repay what you owe. It will also protect you from threats of legal action from your creditors, which is immensely reassuring.
To apply for a DAS you must use an approved money adviser, who either works through an approved state organisation like a Citizens’ Advice Bureau or an FCA authorised private sector organisation like 180 Advisory Solutions.
Please contact our team for a free and confidential discussion of your circumstances in more detail and see how we can help.