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Staring Into the Abyss of Business Debt? A Debt Relief Order May Be Your Lifeline

Drowning in Red Ink? You’re Not Alone

Businesses sinking under a rising tide of debt: it’s an all-too-common tragedy. Red ink pouring from invoices unpaid, creditors hounding you night and day – it weighs on your soul, an oppressive burden denying you sleep. So, you find yourself here, drowning, gasping for air – searching for a way out. Well, you’ve come to the right place: we’re throwing you a lifeline.

A Brief History on Debt Relief Orders

Introduced in 2009, debt relief orders (DROs) provided a revolutionary new path out of the debt abyss for individuals. The criteria were strict: qualified debtors may only have debts totaling less than £20,000, with minimal assets and surplus income. Under a DRO, included creditors cannot pursue recovery during its 12-month active period.

After amendments in 2015, this salvation was finally extended to the struggling self-employed and small businesses. Yes, your business may now qualify for this powerful debt solution, too. Of course, complexities remain – but stick with me, and by article’s end, you’ll know precisely whether this order could be your debt escape hatch.

Is a Debt Relief Order Right for Your Business?

To qualify for a debt relief order, your business must currently…

  • Have total debts less than £20,000
  • Have minimal assets (valuables or savings) totaling under £1,000
  • Have a surplus monthly income under £50 after reasonable living expenses

Ask yourself honestly: does your business fit that criteria? If not, a DRO is likely not the right solution for you. But, fear not, other debt relief options may still offer an escape. Exploring solutions like CVAs, Administration, or Liquidation could lead your company out of the darkness.

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But, if that strict criteria does describe your business’s dire situation – read on. This uncompromising order may prove your guiding light in the night.

What Happens When You Secure a Debt Relief Order?

Upon being granted a DRO, your business receives immediate legal protection from creditors included in the order:

  • They cannot pursue further debt recovery while the 12-month DRO period is active
  • Any creditor currently threatening bankruptcy proceedings must cease all action
  • Your debt included in the order is frozen during this period – interest and charges cannot accumulate

It temporarily halts the bleeding. Your business retains vital cash flow unimpeded by creditor threats and debt accumulation. Potentially life-saving breathing room to recover…or make arrangements to ultimately shutter operations in an orderly manner.

“But,” you ask with furrowed brow, “what happens after that 12-month period ends? Surely, they’ll come for me again!” Fear not – we’ll cover that. For now, let’s explore further advantages…

More Temporary Relief for Your Business During the DRO

Beyond that creditor harassment and accumulating debt halt, the order offers more respite:

  • Your business name is added to the public Insolvency Register – advertised to potential creditors
  • But, assets owned before the DRO began are protected from creditors included in the order
  • Any excess monthly income your business generates is yours to keep during the period

Sounds Too Good to Be True – So What’s the Catch?

You’re quite right to be wary. Government-endorsed debt relief WITH such substantial temporary protections? Nothing’s free, as they say. Here’s what else you need to know:

  • The £90 entry fee is non-refundable, even if your DRO isn’t approved
  • The debt included in the DRO does not actually get reduced or written off
  • If your business acquires property over £1,000 in value during the DRO period, you may be disqualified
  • A DRO shows on your credit record for 6 years, severely limiting access to further credit/financing during that period
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And After 12 Months? The Day of Reckoning

At the conclusion of that 1-year active period, any remaining debt included becomes enforceable again by creditors. Yes, they’ll reawaken like villainous creeps from a horror film.

You’ll be in the same difficult position – unless your business has remarkably turned around in that span. Bankruptcy may loom as the next step.

Of course, there are also alternatives worth exploring first, like:

  • Speaking to creditors about revised payment plans
  • Attempting informal negotiations to reduce the total debt burden
  • Consulting professional debt advisors and licensed insolvency practitioners

Food for Thought on Debt Relief Orders

  • Is temporary debt respite MORE valuable than permanently reducing total debt?
  • Is this order a mere postponement…or does it provide true debt resolution?
  • Should your business’s long-term survival prospects weigh into the decision?

Ponder the implications carefully before pursuing a DRO. It’s a powerful option – but may merely delay an inevitable reckoning with your business’s creditors.

Wrapping Up: The Right Debt Solution Depends on Your Business’s Situation

At the end of day, there’s no universal “best” debt solution for every business. It depends on factors like:

  • Total debt load
  • Asset situation
  • Cash flow realities
  • Short vs long-term survival prospects

A debt relief order may in fact offer the lifeline you desperately need. Or, it may represent putting off the inevitable – a mere temporary stay of execution.

The only certainty is that your business cannot tread financial water indefinitely. Eventually, you’ll sink or need to be resolutely moving towards shore.

Still unsure if a DRO is right for your business’s unique circumstances? Don’t take chances with blind searches – consult a licensed insolvency practitioner. An expert debt advisor will provide the experienced guidance needed to find your path out of crushing debt’s abyss.

Delancey Street is here for you

Our team is available always to help you. Regardless of whether you need advice, or just want to run a scenario by us. We take pride in the fact our team loves working with our clients - and truly cares about their financial and mental wellbeing.

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