Paying by card – know your rights!

Research by the UK Cards Association showed that, in 2016, 77% of national retail sales were made by card. It was also announced in the last few days by the British Retail Consortium that debit card payments overtook cash for the first time, no doubt increased by the use of contactless payment.

Most payments by credit card (including some charge cards) are protected by law: consumers have a legal claim against the card issuer where the goods or services cost between £100 and £30,000 and are not delivered.

In addition, for debit and credit cards (including pre-paid cards), the card schemes provide a system of “chargeback”. Chargeback schemes are voluntary schemes with the terms and conditions set by the card issuer and accordingly the rules vary from issuer to issuer.  However most schemes allow the card issuer to ask the merchant acquirer to reverse a payment made by card with no minimum or maximum limits.

It is unfortunately inevitable that some payments made for services will not be honoured when a retailer enters into insolvency. New guidance issued to insolvency practitioners states the appointed insolvency practitioner must issue a notice on the retailer’s website informing customers of whether their services or goods will be delivered, as well as informing them of the above rights.

The UK Cards Association has also issued a guide to card holder’s rights, which can be found here:

http://www.theukcardsassociation.org.uk/wm_documents/Credit%20and%20debit%20cards%20-%20A%20consumer%20guide%20June%202016%20FINAL.pdf

Ever Decreasing Circles

‘Living beyond means’ – a leading cause of bankruptcy

When you think of Ali Campbell you think of UB40, Shane Filan, Westlife and Martine McCutcheon may bring back memories of “Eastenders”. What they all have in common is being made bankrupt, which goes to prove cash is king.

There is an old joke about the husband who did not report his wife’s card stolen because the thief was spending less than she did. Excluding mortgages, household borrowing in the UK rose to £198 billion and with car financing increasing by 15% and credit card debt by 10% this represents the fastest growth in debt levels since 2005.  Statisticians suggest the average household could last just 32 days without any income and that more than 22% have savings below £500.

This depressing picture is indicative of how austerity has impacted on the general public. However, it does not reflect the true picture because the reports on personal debt do not include “Hidden” liabilities such as personal guarantees for third party borrowing or directors over-drawing on their loan accounts.  The worst case I have seen so far was a former partner of a failed legal practice whose Christmas present in 2014 were demands amounting to £11 million.  Try explaining that to your spouse!

At PBC we see people with personal debts ranging from less than £10,000 up to the poor sole mentioned above. Regardless of the quantum of debt they all endure the same; demand letters, High Court Enforcement Officers, threats of bankruptcy etc.  Admittedly, there are some who consult PBC where bankruptcy is the best option for that individual due to the overall circumstances.  Others, like our client with the unwanted Christmas present, entering into an individual voluntary arrangement (“IVA”) provided certainty and protected his career.

As implied, an IVA is not right for everyone. It is a deal with your creditors; a balanced compromise where there are benefits for both the client and their creditors and demonstrates being more beneficial than bankruptcy.  The key component from the client perspective is you must have something to offer, whether that is an income contribution or tangible offers, or a combination of both.

The principle message has (and will always be) take advice early. The longer you leave debt-related problems the more antagonised your creditors will become, the more cumbersome the debt and the less creditors will be persuaded to support any form of compromise you may wish to put forward.

Be pro-active or accept your fate?

Apart from the obvious frustration, what steps do you take upon receiving the news one of your customers has gone into an insolvency process?  You may have retention of title on stock, it may be a debt write off that is business-threatening to you.

 

For 30 years The Insolvency Act 1986 has been the basis for all insolvencies in England and Wales, subject to various amendments through statute or legal interpretations. However, 6 April 2017 saw the most fundamental change in legislation with The Insolvency (England & Wales) Rules 2016 (“The Rules”) coming into force.

 

Most of the Rules are a consolidation of provisions that were considered to be similar for each insolvency type within The Insolvency Rules 1986.  Other changes are an attempt to “modernise”, such as the ability to communicate through electronic means or, simply via a website.  Other changes are more fundamental on a practical level.

 

From hereon there will no longer be any physical creditor meetings, unless a requisite majority of creditors demand one. Instead we have electronic voting, virtual meetings, resolutions by correspondence and a process known as “Deemed consent”.  The deemed consent procedure could mean notices are sent to creditors on one day and 7 days later a liquidator is appointed with creditors getting only a few days’ warning.  So, what if you believe the conduct of directors has been questionable?  Physical meetings have been a forum for posing relevant questions so, if you believe there is good cause for challenging the directors you must provide a written request for a physical meeting in a very short space of time.  The burden to act quickly really does fall squarely upon your shoulders!  Further information can be found here.

 

The Rules also place the onus upon creditors to monitor for progress reports.  In the past an insolvency practitioner would send notice stating the progress report can be accessed on a specific website, providing you with the file name and password.  That has ceased and it is now up to the creditor to monitor when the reports will be available.  In theory, that is fine but a liquidator has two months after each anniversary to submit a progress report.  What is the creditor supposed to do?  Check every day until it is there?

 

For me, the Rules impose a burden on advisors, credit controllers and the financial institutions to be more aware, act instantly or roll over and let the process take its course. Personally, I am concerned the Government have gone too far and reforms to The Rules will occur but, until that time, creditors need to be proactive.

 

Should you require any further assistance on The Rules, or any other insolvency-related issue then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation.  Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.

PBC announce payment in full to creditors in a bankruptcy.

PBC are pleased to report a distribution in full plus statutory interest to unsecured creditors in a bankruptcy.

 

The only asset in the bankruptcy was the debtor’s 50% share in the dwelling property, where his ex-partner resided. His ex-partner expressed an interest in purchasing the estates half share.  However, due to personal circumstances she was not in a position to make a market value offer and solicitors were instructed in respect of selling the property.  After protracted negotiation, coupled with an order of the court a sale of the property was completed on 1 December 2016.

 

The bankrupt’s half share of equity was received, creditor claims were agreed and they have received payment in full plus statutory interest. The additional benefit has been the balance of funds being returned to the bankrupt.

 

Gary Pettit of PBC said, “The outcome of this bankruptcy demonstrates the benefit of good negotiation skills, coupled with commercial thinking. It would also be remiss not to recognise the professional work undertaken by Katie Summers of summers nigh law for assisting me in achieving this great result.

PBC announce successful completion of CVA

The most common reasons why businesses fail

PBC are pleased to report a dividend has been declared on a company voluntary arrangement (“CVA”) which was successfully implemented.

When first approached, Gary Pettit was asked how to place the company into liquidation. However, following advice the directors restructured the business with PBC’s guidance and proposed a CVA to its creditors, which was approved without modifications in January 2013.  The CVA included on the sale of a freehold property and moving operations was restructured into one site from three, together with monthly contributions from future trade.

Preferential creditors were paid in full and unsecured creditors have received two distributions overall amounting to just over £79,000.

Gary Pettit said, “This case proves CVAs can help save businesses and preserve jobs. It is really gratifying when you can turn a doom and gloom perception (of directors) into a turnaround situation like this one.”

PBC announce large dividend from complex liquidation

Gary Pettit, the liquidator of Alexander – Bale Facilities Management Ltd, is pleased to announce the payment of an unexpected dividend following extensive investigations into the company’s affairs.

The company was placed into compulsory liquidation on 21 November 2011 and R Neil Marshman was appointed liquidator on 6 July 2012. Following his retirement from the practice he was replaced as office holder by Gary Pettit on 22 May 2014.

After substantive investigations into the company’s affairs, the former liquidator successfully obtained judgment against the directors to be jointly and severally liable for £1,208,585 as a result of the various payments made out by the company in the period leading up to its winding up.

Following the appointment of Mr Pettit, a freezing order was obtained and following further detailed enquiries a number of bank accounts and properties were identified resulting in significant realisations.

I am now pleased to report payment of a dividend of 34.17 pence in the pound to unsecured creditors. Creditors’ claims totalling £993,827.96 were admitted and the dividends paid totalled some £339,614.

Gary said, “It is always pleasing to see investigations bear fruit and lead to significant returns to creditors. On the face of it there were no assets available and creditors had resigned to writing off their debt.  This liquidation demonstrates the value of insolvency practitioners when the evidence is available.”

‘Living beyond means’ – a leading cause of bankruptcy

‘Living beyond means’ – a leading cause of bankruptcyRecent statistics released by the government showed the leading causes of bankruptcy in 2015 were living beyond means, relationships breakdowns and reduced levels of income. The data also highlighted differences in the reasons why men and women go bankrupt.

Gavin Bates, Insolvency Practitioner at PBC, said: “These figures are similar in some respects to the statistics we discussed in our blog last year, however, a particular point of interest is that ‘living beyond means’ is the most common reason why both men and women go bankrupt. This certainly correlates with our experience at PBC where we are seeing an increasing number of people who are in financial difficulty because they are spending more money than they can afford.”

The research also ties into the increases in household debt that have been making the headlines recently.  Official figures from the Bank of England showed that personal debt, including credit cards, overdrafts and loans, has risen to its highest level since December 2008, leading debt charities to call for greater assistance for those that are struggling.

Gavin Bates continued: “People seeking credit may be doing so simply so they can afford essential items and cover day-to-day living costs, while others do so to ‘keep up with the Joneses.’ Taking on additional debt may be in some circumstances unavoidable, and works if you can manage to make the minimum payments. It would be better to review all your finances, reduce or cut outgoings and not borrow in the first place. All too often we see people who have suffered a reduction in, or loss of, income, or a period of ill health which make the position unmanageable very quickly.”

Individuals who find themselves with spiralling debts should seek advice as soon as possible so they can take action to get their finances back into shape.

PBC announce large dividend paid from company voluntary arrangement

PBC logo 1

PBC are pleased to report on the recent payment of a dividend from a company voluntary arrangement (“CVA”).

 

After consulting with a financial consultant and seeking advice from PBC, the company proposed a CVA to its creditors which was approved with modifications in December 2013. The arrangement consisted of a splitting of the company into two distinct trading entities which included the saving of the majority of the employees’ jobs.  The arrangement included the sale of assets and contributions from future profits.

 

Recently, the directors of the company approached the joint supervisors regarding the possibility of varying the arrangement by settling the outstanding amounts due in respect of the monthly contributions and the sales consideration by way of a lump sum payment. The variation was approved by creditors who have now received a distribution earlier than originally expected.  The joint supervisors have distributed over £92,000 to creditors.

 

Joint supervisor Gary Pettit said, “It is always pleasing to be involved in the rescue of both a company and the saving of jobs, both of which have happened in this case. The directors sought advice at an early stage which resulted in the possibility of a rescue option being available to them.  This has allowed the company to turn around its financial situation.”

That was the year that was

PBC Business Recovery & Insolvency proudly sponsor the SME Northamptonshire Business Awards 2016

How many of you can associate with the question, ”Where did [the month] go?” In fact, it does not seem that long ago since I was looking back at 2015 to see what PBC had achieved, yet here I am doing it all over again!

Obviously 2016 will be remembered for the (Brexit) vote on 23 June 2016. It is clear we have a period of uncertainty ahead of us and there have even been claims insolvency practitioners will be extremely busy as a result.  However, at PBC we believe the economy is generally robust and while there will always be losers, there will also be plenty of winners so no need to panic or allow the media to talk us into a recession.

Despite what the pundits say, insolvency numbers have fell year-on-year for the past three years and insolvency practitioners are all bemoaning the general lack of new instructions. To be fair, PBC have experienced a similar trend, although the amount of professional advisors who recommend our services has continued to expand resulting in another year of growth.

I suppose two key events in 2016 were the launch of the PBC mediation service, which has attracted significant interest from solicitors and barristers alike. So far, the service has a 100% success record in settling disputes including a £1 million negligence claim against another insolvency practitioner!  The other point of note was the acquisition of another insolvency practice, Bottomley & Co who were based in Rugby.  As part of that acquisition the re-branded PBC Bottomley & Co moved its operations to Coventry, which provides further potential for work in a wider geographical area.

How many readers have experienced those moments when you wonder why you are working all the hours available and for seemingly little reward?  I am no different.  However, earlier this year an extract of an independent industry report was sent to us that concluded PBC was the 25th fastest growing insolvency practice in the UK and were one of only 62 practices regarded as strong in the industry.  I have to confess a slight puffing out of the chest with pride.  That preceded thanking the PBC team because it is their terrific team spirit and desire to ensure tasks are undertaken in a timely and professional manner that contributed to this independent conclusion.

Outside of our day job PBC have focussed on two specific areas.  The first is to be sponsors of the Northamptonshire SME Awards.  We are so proud to have been involved and it has to be acknowledged the entries received were indicative of how vibrant business is throughout the county.  Secondly and for very personal reasons for Kym Carvell, PBC have chosen the Ronald McDonald House charity as our charity to support for the remainder of 2016 and for next year.  Oh, before you ask, no it has nothing to do with burgers and a big clown!  Check them out in this article where you can find out more.  Alternatively, speak to Kym at our Northampton office.

Gary Pettit

 

 

 

Can they touch my pension?

Coin Dropping Into Piggy Bank

The title of this piece is the question I am asked regularly by individuals who are threatened with personal insolvency and are (understandably) concerned their personal pension may be used to repay creditors.

Personal pensions used to be an asset that could be realised for the benefit of creditors. Provided the bankrupt was over the age of 50 years a trustee could realise the tax-free lump sum, the annuities or, in many cases, both.  This all changed with the introduction of the Welfare Reform and Pensions Act 1999 (“WRP”) where personal pensions were primarily no longer bankruptcy assets.

What has been long debated is whether a pension ceases to be a pension and becomes income a person is entitled to when they exercise their right to draw down the pension benefits and, therefore fall outside the protective ring of the WRP.

A bankrupt has a statutory duty to cooperate with their trustee and may face serious consequences for failing to comply, including imprisonment. A trustee also has general powers to seek and overturn previous dealings.  For example, back in the early 1990s many matrimonial homes were transferred into the sole name of the non-business owner for the consideration of “Love and affection” and were, quite rightly, deemed void.  These general duties and powers assist a trustee in his duty to maximise realisations for the creditors and the income derived from pension lump sums and annuities provide funds that assist repayment.

In the case of Raithatha –v- Williamson [2012] EWHC 909 these duties were tested when a trustee demanded the bankrupt exercise his rights to receive the benefits of his personal pension and the judge determined the pension benefits did fall within the definition of income.  Bad news for pension holders who could, by way of this decision, be forced to “Retire early” when it came to their pension benefits.

However, on 7 October 2016 the Court of Appeal overturned the Williamson case. In the matter of Horton –v- Henry the judges decided uncrystallised pension rights did not constitute “Income” and neither the court nor the trustee had power to decide how a bankrupt should exercise elections open to them in relation to their pensions.

This decision does appear to be contrary to the general powers and even promotes debt avoidance by pouring money into personal pensions. However, a trustee can challenge excessive pension contributions and, as I proved a few years ago, demonstrate the pension was merely a tool to defraud creditors.  In that sort of scenario a trustee can obtain some (or all) of the pension benefits.

Assuming the Horton case will not be appealed to the Supreme Court the message appears clear.  If you are over 50 years of age then unless you really need the pension benefits resist exercising your rights to receive them until you are discharged from bankruptcy.  Alternatively, if in doubt you should consult an insolvency practitioner or a pension advisor as a lack of patience (in terms of when to exercise your rights) could prove costly for your future.

Gary Pettit