The rise of insolvency should raise your urgency
In recent times, we have seen a rise in both bankruptcies and IVAs when it comes to how businesses and individuals deal with their debt. While this can be an easy way out for those that owe money, it can leave creditors without a penny.
How much does a company get back from insolvency?
This can depend on various factors, but there are many times in bankruptcy where a company will receive none of the money they are owed, as the debtor is deemed to have no assets whatsoever and or a low income.
IVAs or CVAs are generally better, but not by much. A lot of these cases will leave around 10 pence in every pound paid back. That means that if someone owes you £3,000, for example, you would only be getting back £300.
These numbers can vary depending on a debtor’s income and it’s important to know that if someone is going through an IVA, a creditor has the right to vote on the proposal and demand more money. If you have less than 25% of their overall debt, though, there is a chance you could be outvoted by other creditors and bound to the IVA with very little return.
Company winding-ups can be disastrous because any value left after a companies assets are realised/sold are usually divided up amongst the creditors – after the liquidator’s costs/fees have been taken into consideration. At the end of the process, which can take months even years, depending on the complexity of the business; creditors can end up with nothing.
How can I prevent this?
Some creditors are too slow to try and reclaim their money and often they can be left without anything if they have given the debtor too much goodwill in regards to not collecting the money owed with more purpose.
Even though these insolvencies can be damaging to creditors, they do take time, so it’s important to try and reclaim your money as soon as possible. Using debt recovery services can cost money, but it can be hugely financially beneficial if they can reclaim money before an insolvency proceeding gets underway.
The decision to mark money owed as being a bad debt can be put off by many, hoping that it doesn’t have to come to outsourced credit control. Most of the time, though, that patience doesn’t get rewarded, and instead, you could be left without anything. If you suspect a debtor doesn’t want to pay, the best idea is to contact us at First Capitol Collections before it’s too late.