Debt Recovery using protocols in tough times. Presented by: Horsfields 10 February 2012

Transcription

1 Debt Recovery using protocols in tough times Presented by: Horsfields 10 February 2012

2 Milestones in Insolvency Insolvency Act 1986 and associated Rules Bankruptcy has been around for centuries and we now have one of the more liberal regimes Mass redundancies following Bank appointed Receivers led to the promotion of the rescue culture embodied in the Enterprise Act 2002 and the idea of Insolvency a second chance Consumer Credit Boom has led to record levels of personal insolvencies

3 The post Enterprise Act experience New style out of Court appointment of Administrators from 15 th September 2003 gathers momentum New fast-track bankruptcy procedure now provides the debtor the prospect of discharge in less than 12 months Local taxation authorities outstripping Central government tax authorities in bankruptcy petitions

4 The post Enterprise Act experience Administrations main area of debate Number of prepack administrations are being used as a mechanism for allowing company Directors to purchase the business and assets of the failed company (oldco) by a new company (newco) where they participate in the management of newco Government canvassed by interest groups with regard to treatment of NNDR as an expense in Administration Continuing issues surrounding dissolution

5 The post Enterprise Act experience Personal insolvencies reach record levels Bankruptcy realisations dependent upon the resilience in the property sector and the ability to raise finance on the top slice of equity IVAs current conflicts between the debtor and creditor groups continues Growth in Debt Management Plans(DMPs) and other informal debt management solutions

6 The Tribunals Courts & Enforcement Act 2007 Revisions to County Court Administration Orders Enforcement Restriction Orders Debt Relief Orders Approved Debt Management Schemes?

7 Debt Relief Orders Entry requirements Qualifying debts less than 15,000 Asset values less than 300 Surplus income less than 50 per month Homeowners will not meet criteria Cannot have had a DRO in last 6 years Cannot have a current IVA, be an undischarged bankrupt, have a pending bankruptcy petition or be subject to a BRO or DRRO Must be unable to pay debts Must be domiciled in England & Wales or resident or carried on business there in last 3 years

8 Debt Relief Orders Mechanism will include an application to the local Official Receiver via an approved intermediary Should include a full disclosure of debts together details to identify the creditor and the debts by value OR may ask for more information or refuse to grant the order if it does not meet requirements or the debtor has made false representations or omission Same restrictions and penalties apply as for bankruptcy

9 Debt Relief Orders Where an order is made it is registered on the Individual Insolvency Register Creditors are informed No further enquiry will be made unless a valid objection is made by creditor(s) No enforcement action can be commenced or proceeded with Discharged from debts after 12 months

10 Personal Insolvency Types Individual Voluntary Arrangement (IVA) Fastrack Individual Voluntary Arrangement (FSTIVA) Debt Relief Orders from 6 April 2009 Bankruptcy

11 Discharge Periods Prior

12 Personal Insolvency Statistics , ,000 80,000 60,000 40,000 20,000 Bankruptcy Orders IVAs Debt Relief Orders (DROs) Total 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total

13 Bankruptcy A Last Resort Opportunity to effect recoveries from property equity Ombudsman in support subject to caveats Three key questions Have we considered the alternatives Have we taken appropriate advice on protocol Have we considered the barriers to realisation in the current economic environment

14 Bankruptcy Barriers to realisation Geography Costs can be disproportionately high Vulnerability issues may arise post petition or order Property maintenance issues Buyers market and funding issues 3 year window for realisation

15 Bankruptcy Protocol Proportionality Set debt parameters Land Registry search Property valuation Experian or other credit search Vulnerability checks Letter Before Action(LBA)

16 Future Developments Government looking at enhancing moratorium provisions for companies Main arena of debate is the Call for Evidence in the area of Consumer Debt and Personal Insolvency Key elements include restricting orders for sale for debts below 25,000 Increasing the debt entry level for bankruptcy/winding up Reviewing the structure and safeguards for those seeking debt advice with the possibility of regulation in the sector Introduction of a single gateway for the obtaining of the various forms of debt relief/forgiveness in the appropriate cases Consultation with interested parties/stakeholders

17 Issues for Billing Authorities The Localism challenge NNDR avoidance schemes Intra-governmental liaison Limitations in the use of the bankruptcy action but not for NNDR collection When to use discretionary reliefs Recovery of sundry debt arrears

18 Members Liquidation the missing link Tenant enters into short term Lease 3/5 years Sometimes at a nominal rent Immediately thereafter passes resolution to wind up supported by a Declaration of Solvency (DOS) Does not appoint a Liquidator The company avoids liability by taking advantage of the statutory exemption Stays in blissful limboland forever?