In times of recession, it can be hard for businesses to make sure that they are making enough money to pay all their creditors. With less money coming in, and more going out, debts can soon begin to pile up. Once a business’s liabilities exceed its assets, it becomes insolvent, and action needs to be taken to ensure creditors are paid, and the business survives. One of the preferred options might be a Company Voluntary Arrangement.

Companies can propose a Company Voluntary Arrangement to their creditors, as a method of formally agreeing how long it will take to repay their debts, and how much they are going to repay. If the creditors accept the CVA, and the company that owes the money keeps up with the payment schedule in the arrangement, there are a number of benefits.

Company Voluntary Arrangements are often the preferred option for businesses in trouble, because they will still be able to operate, as long as they comply with the terms of the CVA. How much money they have to repay could also be less than the full debt, and the CVA is a better option for creditors than liquidation, where they might actually recoup a significantly smaller amount of the money owed to them. A Company Voluntary Arrangement also means there will be no additional action taken by creditors to recover their money, as long as the company meets the terms of the Arrangement. A CVA is also a much less expensive than if the company chose to go into Receivership or Administration.

In order for a Company Voluntary Arrangement to be agreed, 75% of the business’s creditors need to be happy with the debt repayment proposal in the arrangement, which then means all of the company’s debts would then be covered by the arrangement. To ensure that creditors agree to a CVA, it is therefore important that a business puts forward as fair and honest a proposal as possible. It’s in the interest of the creditors and the company with the debts to make sure a CVA is agreed, and that it will work.

If your company is struggling with debt, and you think a Company Voluntary Arrangement could help you to turn your business around, it’s important you get advice from a qualified insolvency practitioner, sooner rather than later. They can advise you on CVAs as an alternative to Liquidation or Receivership, and help you work out a proposal that your creditors will agree to. Once you have the protection of a CVA in place, you can concentrate on building your business back up without the threat of any more action from your creditors.

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There aren’t many people who wouldn’t love the idea of being their own boss, but only a few of us actually achieve it. For those that do start their own business, keeping it profitable can be a constant challenge. In the middle of a recession, this gets even harder; and if you find business debts are mounting, it’s important to resolve the issue as soon as possible.

By improving the flow of money into and from your business, you may find that you can manage to resolve your business’s debt problem. Look at increasing the amount of money your business receives by investigating what grants or benefits you should be getting paid. Try to reduce your costs so the business is spending less money, but if this isn’t enough to solve all your business debts, you need to take further action.

When dealing with business debts, it’s important to deal with your priority debts first. These are debts to your more powerful creditors like HMRC, Local Authorities, and mortgage companies, who have the ability to take your property, equipment, cut off your power, and even apply to have you sent to jail. Secondary debts are also important and still need to be managed, but any action from these creditors usually has less severe consequences.

You can make arrangements to repay your business debts in two ways. If your debt problem is only a short term situation, due to a temporary cash flow problem, many creditors will come to an informal arrangement with you to repay the debt. If the problem is more serious, and likely to take longer to resolve, a formal Company Voluntary Arrangement may be a better option for both you and creditors, and make your business debts more manageable while you work to pay them off.

If you can’t keep up your debt repayments, your company may become insolvent. Going into administration will afford you some protection and allow you to keep trading, while a way to repay your debts is found. If this still doesn’t resolve your business debt problem, liquidating the company, or going into receivership, will sell the assets belonging to the company in order to pay off as much of your debts as possible.

Running your own business can be one of the best ways to make a living, but not all businesses succeed. If you find you are getting into trouble, and your business debts are mounting up, it’s important to get advice as soon as possible. Organisation such as Advice UK and Business Link should be able to help you choose the best option for sorting out your business debts.

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Recent reports in the financial media contend that consumer spending has changed dramatically in the past few years. Before the housing bubble burst, loans and credit were easy to come by and Americans were taking on new debt at a furious pace. But ever since the housing market began its free fall and the recession took hold, consumers have generally focused on saving and trying to pay down the debt they accumulated. For many, though, the combination of high interest rates, the size of their debt and a loss of income have made repayment all but impossible.

As much as has been made of the problem of homeowners being “upside down” on their homes’ values, perhaps a comparable problem is the unsecured debt (mostly credit cards and personal loans) that currently plagues millions of borrowers. Interest rates of 29.99% are not uncommon on credit card accounts, and the total monthly payments on these accounts can actually surpass their mortgage payment for some homeowners. “Predatory” lending rates seldom exceeded the 10% mark on first mortgages, just to add some perspective to the 29.99% interest rate charged on the credit cards.

Millions of consumers are now searching for answers to their unsecured debt predicaments. Too many of them are only able to make the minimum monthly payment on their debt, which consigns them to extremely long repayment terms. The solution for many borrowers in financial hardship may be credit counseling and a debt management plan (DMP) with its wide array of benefits.

The main benefit of credit counseling, aside from the financial counseling itself, is that the DMP can significantly lower the high interest rates being assessed on the unsecured debt. It is not unusual for some creditors to provide major rate reductions, while other have eliminated interest charges entirely. The effect of these savings is that the payoff time frame for DMP’s ranges from just 3 to 5 years.

Another benefit of DMP’s is that late and over-limit fees become a thing of the past. This undoubtedly contributes to the abbreviated repayment terms as well. Accounts are also re-aged to “current” status by the creditors for credit reporting purposes.

For consumers who are overwhelmed by the organization skills required for the multiple accounts they have, they will appreciate the consolidated monthly payment that a DMP offers. It can become a very tedious task to stay abreast of all the separate payments and due dates with all the other demands that life can throw at us. So making just a single monthly payment will be a welcome change for many.

Collection phone calls are a very real concern for borrowers who are behind on their payments. A DMP can help with this too due to the fact that these companies have close relationships with the creditors. They are very effective in getting creditors to stop the harassing collection phone calls. Keep in mind, though, that the collection calls will resume if you drop out of the program, and that DMP’s are intolerant of late payments.

Consumers can rely on the fact that their credit score will not be damaged due to their participation in a DMP. This important fact has been verified by the Fair Isaac Corporation (FICO). A notation will be made on the consumer’s credit report, though, that some accounts are being paid through a DMP.

Author excerpt: Jackson Roberts is an experienced debt analyst and has been helping consumers eliminate credit card debt for over 12 years. He hopes to educate indebted consumers about the many credit card debt solutions available.