Why Negotiations is a positive alternative to Insolvency

Posted on: 22 Nov 2017


Previous options for businesses in financial trouble were pay your bills or follow the insolvency process. Not much of an option if your business is suffering temporary financial trouble. Insolvency must have its place in the business world, for no better reason than to properly facilitate the closing of a business,

Insolvency must have its place in the business world, for no better reason than to properly facilitate the closing of a business, realise assets and fairly disburse funds to creditors.

However, the sour consequences for insolvency can be varied and extremely intruding for business owners, here are some:

  • Restricted travel overseas
  • Adverse listings on VEDA
  • Banned as company director
  • Loss of assets
  • Heavy costs

The reason for the interests in the negotiation industry is this: Debt Negotiations have none of these consequences and can achieve the same results as insolvency -and do it cheaper.

A Debt Negotiator specialises in using their client’s unique profile to create a negotiation ground with their creditors. Some profile information that would be useful in the negotiations would be: client’s financial position, creditors/debtors compliance history, personal information, nature of the debt itself and much more. This information is used to hammer out a deal with individual creditors; every creditor will usually receive the same offer with some exceptions.

Let’s face it, some people are not built to run their own businesses and bankruptcy restrictions stop people from simply transitioning from one business disaster to another and leaving a trail of creditors.

However, there are many business owners that are brilliant at what they do yet for one reason or another they fall behind with their financial commitments.

There are countless instances of companies struggling due to illness of key performers, loss of that one big contract, staff fraud, bad advice or making that one wrong investment, the list could go on.

In many of these cases insolvency would not be appropriate, yet the other alternative is rolling the dice with the debt collectors and the debt collection process can be a harrowing experience. Many face ongoing collection phone/text/email campaigns, constant flow of collection/legal letters and eventually litigation and bankruptcy.

If your client does not employ a Debt Negotiator before the legal process it’s advisable they employ one now. Any negotiator worth their salt will have the legal/collection process stopped immediately and moratorium put in place while your client plans their next step.

Further, a negotiator may well identify compliancy problems in the creditors legal processes whereby garnering a better deal from the slightly embarrassed creditor.

If your client is considering bankruptcy, speak to a Debt Negotiator first and leave bankruptcy as the last resort. You can choose to pull back from a negotiator at any time you want with little or no consequences, but once you’re bankrupt then that horse has bolted.

This article is written as a general guide only and not for individual circumstances. 

Laurence Hugo is the director of Credit Mediation Service Pty Ltd and has worked in debt negotiations for 25 years and pioneered the Debt Negotiation Industry in Australia. Credit Mediation Service Pty Ltd have assisted thousands of families and businesses get out of debt and has overseen the forgiveness of tens of millions in debts. Laurence Hugo has also worked with the homeless through Wesley Mission and for 7 years performed suicide / mental health training for counsellors with Sydney Life Line.