Insolvency - Case Study - Individual Voluntary Arrangements for partners
Benefits of paying your creditors under a scheme where four years free credit might be obtained
Thomas & Partners, Chartered Accountants is the partnership of Thomas Thomas, Peter Price, Richard Richards and Walter Williams.
They have realised that the partnership is insolvent. To continue the trade of the accounting practice partnership the firm proposed a partnership voluntary arrangement (PVA) with the partnership creditors. That PVA was approved by the partnership creditors. Subsequently three partnership creditors decided to issue county court claims against two of the partners in their individual capacities. Partnership creditors can do this as each partner is "jointly & severally" liable for all of the debts of the partnership.
Each of the partners also have large personal credit card debts. Those personal debts have mainly resulted from them using their personal funds to pay business debts over the last few months in order to keep the partnership afloat.
To address the claims of the partnership creditors and their personal creditors each partner decided to propose an Individual Voluntary Arrangement (IVA), These IVA's were interlocking and encompassed all of the partnership and personal debts. The IVA's were agreed by the creditors.
The personal and partnership creditors were effectively frozen by the partnership and individual voluntary arrangements. Agreed monthly instalments were paid under each IVA and under the PVA. These agreements left the partners free to concentrate on their work and to turn around the affairs of the partnership.
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