How Can Insolvency Practitioners Help with a Debt Management Plan?

Taking a business through a period of financial difficulty can feel like a Herculean task at times. Once debts reach a certain stage, it can feel almost impossible to bring them back down again, and you need to make sure you get help.

In most cases, it will be beneficial to speak with an insolvency practitioner (or IP). Whether they just ease your mind with some advice, or help you to develop a fully-fledged debt management plan, these professionals can massively improve your situation.

Carry out an initial assessment

The first thing that an insolvency practitioner from somewhere like Chamberlain & Partners can do is carry out an initial assessment. There are a number of complex and often quite confusing options available for businesses going through periods of financial hardship, and choosing the right one is absolutely crucial.

The insolvency practitioner will look at how severe the situation is, whether there’s a possibility that the business can be saved, and which legal obligations need to be met within a specific time frame. This assessment will inform you which avenue will be best for you to take going forward.

Providing advice on legal routes

These are a few of the main options that an insolvency practitioner might suggest for your business.

Debt management plan

A debt management plan (or DMP) is an informal plan or agreement that is drawn up between a debtor and their creditors. This plan will usually be drawn up by a third party such as an insolvency practitioner or debt advice charity. It’s important to note that DMPs are relatively ‘loose’ from a legal perspective, especially compared to administration or insolvency proceedings.

Liquidation proceedings

If it’s impossible to continue operating the business and pay back creditors over a longer period of time, it may be necessary to liquidate the business in question. There are a few different ways to do this, but all of them will involve selling off the business’s assets and distributing them in order of legal priority.

Administration

In some cases, it might be suitable to put the business into administration. This way, you won’t maintain control of the business, but an insolvency practitioner will try to find a way of saving it. This might be applicable in cases where you have a strong brand, and a good chance of turning things around.

Creditor negotiations

No matter which option is chosen, an insolvency practitioner will act as a negotiator between all relevant parties, especially between debtors and creditors. They will try to navigate the situation so that all parties are treated fairly and in accordance with the law, without taking ‘sides’. It can make a big difference if you can find an IP that’s good at communicating and can get complex matters across in a clear manner.

Getting a business out of debt can be immensely difficult, but you don’t have to do it alone. By working with a competent insolvency practitioner, you can maximise the chances that your business comes out the other side intact.