A compromise is an agreement, between the creditors and the debtor once it is accepted by the creditors. The two main elements of most compromises allow:
- The debtor to pay back their debt in part or full over a defined period. If it is agreed that the debtor will pay in part, the remaining debt is written off.
- Debts to be frozen, and any legal action against the company regarding the debt is suspended during compromise
The personal compromise process is private and out of the public eye to a certain extent.
- Appointment of a Provisional Trustee
The Individual appoints a Provisional Trustee to manage their affairs and the Court is notified that a compromise is being put forward.
- Compromise to Creditors
The Provisional Trustee prepares and distributes the compromise to all the creditors.
- Creditors Meeting
A creditors meeting is called, and the compromise is voted on.
- Approval by the Court
Once the compromise is approved by the creditors, it is then put before the Court for its approval. The Court is also asked to confirm the Provisional Trustee.
- Distribution Under Compromise
The trustee then makes the distributions to the creditors as per the compromise.
Personal Guarantees = Creditor
All of the individuals personal guarantees (whether called up or not) are also creditors in the compromise. This is particularly important as people often assume that parties are not creditors because their personal guarantee is not currently being pursued.
Requirement to Accept Compromise
Once the compromise is put to the creditors for consideration, the creditors must vote to approve the compromise. For this to happen there must be a majority in number and 75% in value of the creditors voting either in person, proxy or postal vote.
Putting a Compromise together that will satisfy both the creditors and the individual is not an easy task. With the only in-house legal team and over ten years of experience in the industry, Waterstone can carry out Personal Compromises in an effective, cost-efficient manner.
Book a free consultation today so we can help look at your current options and see if Personal Compromise is the appropriate way forward.