Case Studies

Case Study One: Mark and Laura

Mark and Laura are married with two children aged 16 and 10. They live in a house valued at £200,000 with a £160,000 mortgage, which has 20 years to run. They also owe around £85,000 on credit cards and loans. The loan, mortgage and credit card repayments total £1,800 per month, which is proving impossible to meet from their family monthly income of £2,400. They calculate that they currently have around £250 per month more going out than coming in.

Bankruptcy will mean the loss of the home to repay debts. They would be better looking at an IVA to repay debts at an affordable level for 60 months and protecting their family home.

CVA Case Study – Software Company

This company produced software programmes for the education sector and had traded for 6 years. Although trading was good for much of this period, the company had recently entered into a contract to supply local schools with its new software product and if this trial was successful they would look to offer the product nationwide. The directors of the company felt that the new product could be extremely profitable but it had taken their eye away from the main core of the business resulting in a reduced turnover.

The product had taken longer than expected to develop and the increased cost involved now meant the company was experiencing cash flow problems, leading to a build up of debt.  The company had debts of £70,000 to HMRC. The company also had 10 other creditors who it owed another £40,000 in total. This made £110,000 worth of debt that required paying immediately.

Company Directors approached Debtfocus to look at the company position following creditor pressure, with debts in excess of £600,000.

After analysing the trading position it was clear that a CVA wasn’t viable as the company was only just breaking even. Accordingly, Debtfocus arranged for independent Surveyors to provide a valuation of the company assets on a going concern and break up basis {by Auction}. The directors expressed an interest in buying the company assets as they fancied giving the business another go with smaller premises and a smaller workforce.

The directors were very worried about the recent bad press concerning pre-packaged administrations however Debtfocus have a wealth of experience in handling such cases and the main route to a successful pre-pack is to get professional advice from the start from a Licensed Insolvency Practitioner.

The directors of a small manufacturing company contacted Debtfocus in early 2010 after experiencing cash flow problems and unable to maintain payments to their creditors. In total the company owed £270,000. Bailiffs were at the door, HMR&C were threatening to issue winding up proceedings and the 20 employees were getting nervous and looking for new jobs.

After a thorough review of the situation, the decision was made to immediately put the company into Administration with a view to protecting the company from action against creditors.

Once the pressure was off, the directors and Debtfocus worked together in continuing to run the company without the pressure of historic debts and looked at the options going forward.