By entering into an Individual Voluntary Arrangement (IVA), our client was able to deal with his financial problems in a way that satisfied his creditors, the staff he employed and him.
William Pennington is married, in his sixties, and has no dependents. He is self-employed, drawing a salary from his business. However, for several reasons detailed below, he found himself in severe financial difficulties.
As a conscientious man, he did not want to apply for bankruptcy and just walk away from his responsibilities and leave his staff out of work.
How the problems arose
In 1996 he began trading as Floor Design from premises in Bolton, operating as a retail carpet business. In 2000, the business decided to concentrate on flooring contracting. Trade started relatively slowly, but by 2005 he was enjoying his most profitable year.
On the promise of a contract in Leeds, he decided to open an additional depot in nearby Barnsley. However, it took more than two years for the work to materialise. As a result of the time-delay, he had to support the costs of this new Barnsley depot during this period. This factor, along with rising fuel and overhead costs, meant his cashflow was suffering.
In 2006 he was awarded a substantial contract by one of his existing clients. However, there were difficulties from the start of the contract which meant that he had to pay his workmen a premium rate due to abuse they suffered from the tenants of the housing estate where the work took place. This led to large losses being incurred and a decision was made to terminate the contract. This was not an easy decision as the client was one of his main suppliers of work.
Like most businesses, his business felt the effects of the Recession. In 2008, acting on the advice of his Accountant, he closed his retail shop in an attempt to cut costs.
He then suffered serious health problems. Although he continued working for some time, after a while he realised that he could not continue under such pressure.
In addition to these problems, formal proceedings were also taken out against him by two of his creditors.
He had further discussions with his Accountant, and it was felt the best way forward for him would be to enter into an IVA.
Consequently, he approached John Bell of Clarke Bell for his expert Insolvency advice. After all the options were explored, it was considered that an IVA would indeed be the best option for him and his creditors.
The IVA will last for five years, with Mr Pennington paying a contribution each month. A number of his assets were realised including:
- interests in properties
- an endowment policy
- premium bonds.
However, some assets were excluded from the Arrangement:
- the matrimonial home ~ as it is in his wife’s name and always had been from the date of purchase
- his car ~ as it is essential to him and was not of excessive value
- his business tools, equipment and stock ~ as they are essential for the on-going running of his business.
The benefits of the IVA
The reasons that, in this situation, an IVA was a better option than Bankruptcy are:
- Mr Pennington wanted to avoid Bankruptcy as he did not want to walk away from his responsibilities.
- The IVA took the pressure off meeting impossible debts which were swallowing up cash.
- The business was able to continue in a viable state, giving time to repay as much as of the debt as possible.
- The creditors would receive more than if he were made bankrupt.
Mr Pennington said:
“Thanks to the help I received from Clarke Bell, I am able to pay off my debts in a reasonable and realistic manner. As my health improves, I feel able to continue to trade in, what is essentially, a viable business.”
John Bell, of Clarke Bell, said:
“I am glad that we were able to help Bill deal with his financial issues and come up with a viable and workable solution for him, his business and his creditors.”
