Informal Agreements with Creditors

Informal Agreements including Time to Pay Arrangements with HMRC

What are informal agreements with creditors?

Informal agreements with creditors are flexible arrangements made between a debtor and their creditors outside of formal legal proceedings such as bankruptcy, liquidation, or any other formal insolvency procedures.

With an informal agreement, the debtor typically negotiates with their creditors and suggests a plan to repay debts over a period of time. The plan can involve adjusted terms such as

  • Reduced payment amounts or intervals
  • Extended deadlines
  • Partial forgiveness of debt.

The informal agreement approach can allow both parties to avoid the time and expense of formal legal proceedings while still working towards resolving the debt.

However, because informal agreements are not legally binding in the same way as formal agreements or court-approved plans, they may not be the best way forward for every personal or business in debt. Make sure that you seek professional recovery and insolvency advice before entering into any informal agreements.

Pros of Informal Agreements with Creditors

Informal agreements with creditors are often a good way to deal with a smaller number of creditors who are willing to work with you. Whilst they are not legally binding, they demonstrate the debtor’s commitment and proactive approach to addressing its inability to settle its debts as and when they fall due.

BRI Business Recovery and Insolvency can assist you with how best to consider and set up an informal agreement to present to creditors. Contact us today for more information.

Cons of Informal Agreements with Creditors

As informal agreements with creditors are not legally binding, they can be cancelled by either party at any time without notice. This creates a significant risk of uncertainty, especially as agreements can often be spread over many years.

Debtors can enter into the agreements with good faith. After many years of successfully repaying, a creditor could simply commence legal action for recovery, which may undo the otherwise good work of the debtor.

Time to Pay Arrangements

Time-to-Pay (‘TTP’) Arrangements with H M Revenue and Customs (‘HMRC’) are a similar informal agreement but relate only to HMRC.

TTPs are a good way to deal with HMRC debt if an individual or company doesn’t owe much to other creditors and isn’t under significant pressure from them. HMRC has certain parameters within which it can accept reasonable and realistic offers, such as length of time and amount.

However HMRC will never accept an offer of anything less than payment in full. The only way to part settle the debt Is to formally enter Into an Company Voluntary (‘CVA’), Partnership Voluntary Arrangement (‘PVA’) or Individual Voluntary Arrangement (‘IVA’).

How BRI can Help with Informal Agreements with Creditors

BRI Business Recovery and Insolvency are here to help all companies or individuals who have received formal requests for payments of a debt that cannot be paid. We have a vastly experienced team who have strong contacts within HMRC and have dealt with a number of aggressive creditors.  We can also help you with informal agreements with creditors.

Dealing with distressed creditors quickly is of great importance in determining a company’s/individual’s financial future.

Therefore, please do contact us if you would like further information and assistance regarding any aspect of your business’ debt. There is no charge for doing so and it is without obligation.

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