Payment plans with creditors

A business that cannot pay everything it owes when it falls due can often still pay it in full if it is given longer. The difficulty is that each creditor decides alone whether to wait, and one that loses patience can set the others off. A payment plan agreed early turns a series of reminders and threats into a single arrangement everyone can work around, but only if it is written so that it still holds when the first instalment is late.

Negotiating with creditors depends as much on the order of the conversations as on the figures. Some creditors will give time, some want something in return, some are bound by their own procedures, and every concession has to be recorded so that it can be relied on:

• the rules on standstill agreements, and on what each side gives up while talks continue;
• the rules on rescheduling a debt — the new instalments, the interest that runs meanwhile and the conditions attached;
• the rules on a partial write-off, and on how a creditor’s waiver is worded so that it cannot later be withdrawn;
• the rules on the security or guarantees a creditor asks for in return for more time, and on what they add to its position;
• the rules on treating creditors alike, and on side arrangements that favour one over the others;
• the rules on tax and social security debts, and on the payment arrangements the authorities are prepared to grant;
• the rules on default under the plan — acceleration, revival of the original debt, and the notice owed before either;
• the rules on the tax effects of a debt waiver for the company and for the creditor that grants it.

Our lawyers can support you with this.