Sir Michael Caine’s son-in-law avoided bankruptcy last week after agreeing a settlement with a man he allegedly owed £120,000, which he had borrowed to bankroll building projects.
Michael Hall borrowed the money from businessman Russell Teasdale in 2007 but his lender claimed that since then only just over £3,000 has been repaid, so was taking Mr Hall to court. However, to avoid bankruptcy proceedings, Mr Hall handed in an agreement, or consent order to the judge at Kingston Crown Court.
An informal agreement can be a good way of avoiding bankruptcy, as long as a compromise can be reached between the two parties. To formulate one, the borrower should write to their lender and advise that they cannot currently repay the debt.
There should be a timetable included in the letter as to how much can be afforded on a regular basis and then hopefully both parties agree to the terms. However, creditors should note that, although this is an informal agreement, if it is not followed through, further action can be taken to recover the loan.
In this case, the agreement was reached after lawyers acting for Mr Teasdale had issued a statutory demand, which would have forced Mr Hall to pay up. However, this was countered by a set aside application by Mr Hall, in a bid to have proceedings against him halted.
A statutory demand can be used to ask for payment of a debt from an individual or a business and when anyone gets one, they have 21 days within which to either settle the debt or come to an agreement over how they will pay.
However, as in this case, the debtor may apply to the court to set aside the demand on the basis that the debt is disputed on bona fide grounds. In the end, however, the agreement seemed the best way forward for both parties, although no details of the case have yet been published.
Tim Close is an accountant specialising in business insolvency, debt recovery and business rescue.