Seek help early if bankruptcy a threat
If youre facing bankruptcy,
it could pay to consult a
financial adviser, but
beware the unscrupulous.
Mike Stones reports
HAVE you looked behind the mantelpiece clock recently? If there is a growing pile of unpaid bills, prompt action could make the difference between losing or saving that new tractor or even your farm.
Its a familiar story for independent financial specialist David Zacheim. "Seeking help at an early stage is vital. Some farmers hope things will improve, but stumble deeper into debt," he warns.
Banks and other large-scale financial companies often work to rigid programmes and sometimes pay little regard to farmers needs, he claims. "Often, they make scant provision to meet running costs, such as feed bills, while paying off debts."
Also some finance companies are over-keen to reclaim machinery regardless of whether it is needed.
Mr Zacheims approach is to assess the liabilities and assets of the business and the farmers ability to pay off at least some of his or her debt. "Often farm records are in a bad state and its essential to be realistic about liabilities and assets."
After that assessment, its time to talk to the creditors. "Its vital to speak to the finance companies as soon as possible to avoid machines being reclaimed." Arrangements can be made either on a formal or an informal basis. The latter involves the farmer agreeing to repay some or all of the debt over a set period.
Creditors are often surprisingly receptive to offers of partial repayment of as little as 25p in the £ over a five-year period, he says.
After reaching an agreement, the farms financial performance and debt repayment plan is reviewed at regular meetings. "We specialise in arranging deals between farmers and their creditors in cases where farmers dont want to make themselves insolvent. Its often possible to reach agreement but such arrangements dont give the protection of the courts," Mr Zacheim warns. A creditor could change his or her mind, but that doesnt happen often.
So how does he measure success? "Ideally, farmers gradually pay their creditors in full. But often they fall too far behind; making it necessary to strike an agreement."
Few clients are forced to declare bankruptcy. "Less than 10% of clients go bankrupt because usually something can be done."
When it comes to fees, Mr Zacheim warns against unscrupulous operators. "Warning signs are requests for payment on the first visit and promises to solve problems at a stroke."
He stresses that farmers must realise the world is not against them. "If farmers speak to their creditors early enough they will be surprised at how receptive they are to reaching agreement." *
Voluntary insolvency worth considering?
lVoluntary insolvency arrangements are worth considering despite their bad name, says Mike Greetham, partner in charge of professional services at farm business consultants Andersons.
"Outside farming, voluntary arrangements are often abused. Within agriculture they are respected and offer some flexibility," he says. Look for mid-sized operators, he advises.
"Small-scale practitioners lack the breadth of experience and may have difficulty in carrying the banks with them." And large-scale companies can be less responsive to the needs of farmers.
Beware operators offering deals which seem too good to be true and look for references from the banks, Mr Greetham warns.
lIts vital to check the credentials of insolvency practitioners, says Richard Vidall, head of NFU Legal Services. "Ask for evidence of the individuals track record. Question how many arrangements are successful two or three years after the agreement was struck," he says. Of particular concern are voluntary arrangements, which drag farmers into expensive admin charges.