Negotiating a way out of unmanageable debt
By Mr Bankruptcy
15th March 2024
In many news stories we hear about ongoing negotiations to resolve disagreements or even conflicts. As debt advisors, negotiation is one of the services we offer clients, and it has become a key tool in many of our cases. So how does negotiating help to resolve an unmanageable debt?
What is negotiation?
Negotiation is a form of dispute resolution in order to reach a mutual settlement. This is often facilitated by a trusted third party, or negotiator.
It differs from mediation in that a negotiator will represent one party’s side and the talks require both sides to come to a solution. In mediation, the mediator will be a separate entity that proposes a solution to the disputing parties.
Some benefits of negotiating a settlement
Winston Churchill once said: “To jaw-jaw is always better than to war-war” and starting a negotiation process with a creditor certainly has benefits:
- Keeping talks open between creditor and debtor can stop a situation from escalating.
- Exploratory discussions can reveal areas of shared interest, moving both parties away from a “zero-sum” mindset.
- Negotiating is usually cheaper and quicker than litigation, so you can get back to your commercial activities without losing so much time and income. In addition, if the evidence to support your case isn’t that strong, you may get a better result than through the courts, which rely on hard evidence.
- Negotiating improves relations between parties and increases the chances of coming to a mutually acceptable agreement. Disputes, while inevitable in business, can have a negative effect on relations so resolving a dispute amicably can help you preserve a working relationship with the other party.
- Negotiation can be informal and confidential so you may be able to avoid unwanted publicity.
On the other hand, the process can take 6-18 months to reach a deal. Neither are there any guarantees that a creditor (e.g. the bank or HMRC, etc) will be willing to negotiate. Even if they do, there’s no obligation for them to come to a legally binding settlement.
However, provided that negotiations are conducted in good faith and are honest, we find that a settlement can usually be achieved.
Some successful outcomes for clients
One client came to us after receiving a demand from his bank for nearly £370,000 under a personal guarantee, secured on his house following the liquidation of his business.
Our client wanted a quick resolution but, in our experience, the longer and harder we negotiate, the better the result we can normally achieve. Not only were we able to negotiate with his bank to save £148,000 but the bank agreed to remove the charge over his property, removing the danger of repossession.
We even take on HMRC; an accountant referred their client to us had fallen behind with his tax returns and faced a self-assessment tax bill for more than £93,000. It had come to the point that HMRC issued a Statutory Demand, and the businessman was facing imminent bankruptcy.
After taking on the case we told HMRC about his personal reasons and explained why he had fallen behind with his payments. HMRC didn’t want to negotiate initially, but once we highlighted his vulnerable circumstances, they joined a dialogue and moved to a position where both sides agreed to a final bill of £30,000. On a personal level, our client could put his debt problem behind him and get his life back on track.
Sometimes, negotiation isn’t the complete answer, but it can lead to one. Another client received a demand for £75,000 under a personal guarantee backed by the Enterprise Finance Guarantee scheme. When we looked at the documentation, we found what appeared to be irregularities in the execution of the agreement, indicating that it was mis-sold.
Despite lengthy negotiations with the lender, we had to escalate the matter and after more than two years of talks the complaint was resolved in favour of our client, to his huge relief.
How we negotiate at James Rosa Associates
At James Rosa Associates we are experienced negotiators who are ready to go in to battle for our clients, usually against more powerful parties.
As well as experience, we use negotiators with the right suite of interpersonal skills, including the ability to communicate, actively listen, ask the right questions and persuade. They are also decision makers, with emotional control and a high level of organisation.
We ensure every client is fully aware of all options open to them. When exploring whether a lump-sum payment may be acceptable for a creditor we look at how this might be found, e.g. from a family member, friend, or even a business associate.
In these scenarios, we find that even if the lump sum isn’t enough to settle the original debt in full, most creditors will entertain negotiations in good faith so long as is it makes commercial sense for them to receive something rather than just pushing for bankruptcy and receiving nothing at all.
No matter what your circumstances, the first step to tackling unmanageable debt is usually to talk to someone you can trust. A professional debt advisor could help you to navigate a path to a brighter future.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors offering a full range of advice and professional services to both individuals and business owners/directors, including:
We are well known for taking a supportive, non-judgemental and discreet approach, putting clients facing unmanageable debt at their ease and giving them hope.
We are fully authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to match their specific circumstances.
Are you entitled to a free consultation?
You may qualify for one of our free consultations. If you need to tackle an unmanageable debt or interest repayments, or want to bring a dispute to an agreeable resolution contact James Rosa Associates, ring 0845 6807217 or email us at enquiries@jamesrosa.co.uk.
Please be advised that all views expressed in these posts are those of the author and not of James Rosa Associates ltd.