A Sharp Intake of Breath?

Under new initiatives being proposed by R3, who represent business recovery professionals, individual debtors would be given a 28 day ‘breathing space’ in which to obtain professional advice regarding their debts. The aim of the initiative is to give debtors the opportunity to seek professional guidance on their debts at an early stage in the hope that they can reach an agreement with the creditor without the need to become involved in debt recovery and insolvency proceedings.

Debtors would be informed of the availability of ‘breathing space’ upon becoming financially distressed. This information would be compulsory and if the debtor opts to utilise this opportunity then a record would be kept on a central register. There would be limits on this facility; namely that it can only be utilised by the debtor once every year, it would be mandatory that the debtor receives professional advice during the ‘breathing space’ period and that it can be challenged by creditors if they feel the debtor is using it as a delaying tactic.

Clearly the hope is that it will allow creditors to recover the outstanding sums without the need to get involved in lengthy and costly proceedings and that debtors will be able to manage their financially distressed situation and achieve a less draconian outcome than is usually the case with debt and insolvency proceedings.

In the age of Alternative Dispute Resolution (ADR) this initiative represents an attempt by the insolvency profession to integrate the spirit of ADR into debt recovery and should it be adopted by the industry it may lead to less of a systematic approach to debt recoveries in favour of a more conciliatory and facilitated approach.

The practical effect will depend on the extent to which both creditors and debtors buy into the initiative. It is already in place in countries such as Canada, Australia and Scotland and it appears at this stage it is a case of watch this space.

Forbes Solicitors has a specialist Debt Recovery Department with practitioners possessing expertise in recovering sums big and small for creditors. If you wish to speak to someone in our Debt Recovery Department then please do not hesitate to contact Alison Nelson or Katy Morris on 0800 321 3258.

This entry was posted in Debt Collection.