Dealing with creditor harassment is one of the worst parts of having your limited company become insolvent. While creditors are well within their rights to chase a company for what it owes them, how they notify you and the lengths to which they’ll go to recover that amount can vary, with some conduct crossing the line of what’s acceptable.
Ignoring initial reminders can lead to court orders, visits from debt collectors and bailiffs, and can even result in attempts to wind up the company.
While distressing, creditors can still do this. However, others may act outside of what’s reasonable. In this heightened state of emotion, what is or isn’t appropriate can become hard to distinguish.
So, what is considered creditor harassment? And how can your company deal with it?
Repayment reminders vs creditor harassment
As stated above, creditors are within their rights to remind a company that owes them money to repay what they’re owed.
As such, they are allowed to:
- Send repayment reminders to the company’s premises via phone or post.
- Instruct debt collectors or bailiffs to visit your company’s premises.
- File a County Court Judgment (CCJ) or a Statutory Demand against the company.
However, your creditors chasing for repayment are not allowed to engage in the following, which could be considered harassment:
- Sending bailiffs and debt collectors to your home if the debt relates to a company.
- Using threatening language in communications against you or friends and family.
- Worsening your financial situation, encouraging you to take out credit to cover their charges, or to pay more than you can afford.
- Implying they have more legal powers outside of their actual remits.
- Threatening to involve the police.
- Contacting you at unsociable hours.
- Contacting you via social media.
Citizens Advice has an extended list of what is considered creditor harassment.
If your creditor has committed these, you can complain to the creditor, their regulator if they have one, or the financial ombudsmen.
Should I ignore my creditors?
Though it might be tempting to bury your head in the sand and hope that the problem will go away, doing so may only worsen it. Creditors may take your inaction as apathy, and they can take more severe action.
Ignoring repayment reminders means creditors can escalate to formal repayment orders, such as CCJs or Statutory Demands, potentially resulting in visits from debt collectors and bailiffs. Continuing to ignore these demands for repayment means that creditors can apply for a winding up petition. If unchallenged, this will lead to the company’s bank accounts being frozen, forcing the company to close through compulsory liquidation.
You should be especially careful if your company’s debt is to H.M. Revenue & Customs (HMRC), who will not hesitate to pursue a winding up petition.
What can I do to stop creditor pressure?
If your company’s creditors start chasing you for debts that the company can’t repay, you could try contacting the creditor and, if they’re open to it, negotiate a payment plan.
If this isn’t possible, or you’ve already tried and failed to repay through an informal arrangement, you should speak to a licensed insolvency practitioner, regulated professionals who can carry out formal insolvency procedures.
Which process is most suitable for you depends on the company’s circumstances.
A Company Voluntary Arrangement (CVA) can help the company repay an affordable amount in monthly instalments. It is best suited to companies with viable business models who need help with unmanageable debts.
Administration can help restructure the company and secure a better return to creditors. Creditors Voluntary Liquidation (CVL), on the other hand, closes the company through an orderly and managed process, drawing a line under the insolvent company, writing off its debts, and allowing the directors to walk away and start afresh.
To summarise
Dealing with creditor pressure and harassment can be a challenge for directors of insolvent companies. While creditors can pursue companies that owe them money, their actions should not cross the line into harassment. This harassment includes using threatening language, contacting you at inappropriate times or away from a business’ premises, or implying they have legal powers beyond their means. If a creditor does this, you can complain to the creditors themselves, their regulator, or the financial ombudsmen.
Ignoring repayment reminders will only worsen the situation, with creditors able to apply for court orders, employ debt collectors or bailiffs, and potentially winding up petitions. To mitigate creditor pressure, directors can negotiate payment plans or seek help from a licensed insolvency practitioner. Depending on the company’s circumstances, they could explore options like Company Voluntary Arrangements (CVA), administration, or Creditors Voluntary Liquidation (CVL).
