Home / Investment And Intellectual Property: Negotiated Agreements

Investment And Intellectual Property: Negotiated Agreements

Bankruptcy has an everlasting impact on the entrepreneur or the company. If you are bankrupt, you have to give up personal possessions as an alternative way of managing your debt. When the financial issues have a bearing on your ability to pay back the creditors, you are heading towards bankruptcy.

While bankrupt, understand the financial situation of the family; be realistic about your debits and credits. Make it the last resort and choose wisely among the following alternative options:

  • informal arrangements
  • administration orders
  • debt relief orders
  • debt reorganization plans
  • individual voluntary arrangements

These are among the popular alternative options to bankruptcy. The best option will depend on your personal circumstances, future prospects, debits and credits. The Insolvency Service is an agency of the government with a wide network of offices in England. They investigate the bankruptcy and offer guidance in overcoming this stressful situation.

When you choose any of the alternative options to bankruptcy, it is vital to remember that:

  • Secured creditors have the right to your personal possessions and proceedings from sales, if any.
  • In case of unsecured loans like credit card payments and bank overdrafts, the creditor can get a charging order from the court for further action.
  • Your credit rating may decrease
  • There may be a plausible negative effect on your future employment.

Consider the following before choosing the alternative option to bankruptcy.

  • Ability to pay of all or at least most of the debts
  • Consideration of priority debts
  • Will it have a binding effect on the creditors and time duration, if yes
  • Impact on employment, credit rating and personal life
  • Consultation fees
  • Capacity to make repayments on a constant basis

Negotiated Agreements

Negotiated agreements are a popular and appropriate approach as an insolvency option. Organize a meeting with the creditors for a negotiated agreement to repay the debt owed to them. The payment can be a large amount in one payment or regular payments based on your income.

The payment mentioned in a negotiated agreement will depend on household expenditure that are duly necessary and the income statement. Sometimes, the creditors may agree for a token payment in unfortunate circumstances like ill health. Negotiated agreements consist of following details:

  • Payment terms in detail with respect to amount, time frame and payment dates
  • Analysis of how much the individual can afford to repay, household expenses, additional income
  • Reduction in interest charges
  • Regular updates of the financial status to ensure clearing off the debt in a shorter period of time.
  • Cover all aspects of the negotiated agreement as discussed
  • The negotiated agreement must be in writing and dated clearly
  • The negotiated agreement must be approved and signed by the negotiating parties
  • The negotiated agreement can be redrawn upon consent by both the parties involved

Advantages of Negotiated Agreements

  • Negotiated agreements are a popular and accepted method by both creditors and insolvents
  • Fair terms on sharing of payments are discussed and recorded in negotiated agreements
  • Possibility of renegotiation after a certain duration of drawing up a negotiated agreement
  • Discussion of a negotiated agreements can be made by just the parties involved without need for an outside agency
  • Some creditors do reduce the actual payment by either writing off a small amount or by reducing the interest charges owed. These details are clearly mentioned in a negotiated agreement

Disadvantages of negotiated agreements

  • Discussion of a negotiated agreement can be time consuming as it will be in detail after much hashing
  • Reconsideration on the actual payment will be the sole decision of the creditor and a tough task for the insolvent while discussing the terms of a negotiated agreement
  • After drawing a negotiated agreement, the insolvent is made solely responsible for the payments with the creditors being updated on the circumstances
  • Sometimes, creditors rely on an advice agency and refuse to deal with the concerned individual directly for making a negotiated agreement. It is easier to deal with an organization rather than on individual basis.
  • Ensure that the negotiated agreement has a clause that the creditor will not take any undue legal action against you.
  • The negotiated agreement makes you liable to pay according to the payment terms, so keep an option for renegotiation.

Best alternative to a negotiated agreement (BATNA)

This is an alternate plan when the negotiators are unable to reach amicable terms. It becomes the focus and a point of advantage in negotiations. Having good alternatives will help reach mutually satisfactory negotiated agreement. Consider the following factors while planning your BATNA.

  • The relative cost involved as against the cost of the best alternate option in both short term and long term will decide your affordability
  • Analysis of consequences of every possible alternate option to insolvency
  • Most feasible and realistic option that one can implement in a negotiated agreement
  • The kind of impact that the negotiated agreement will make on your financial and personal affairs
  • A creative approach can make your negotiated agreement a bargain and a viable option to insolvency
  • Sometimes, a third partner can afford an attractive negotiated agreement as the judgement will not be clouded by personal emotions
  • Use agencies that can bring their resources and expertise in drawing a favourable negotiated agreement

Mediators and negotiated agreements

There are highly qualified and experienced mediators in the UK like Venture Giants and Consensus Mediation. They offer specialized and skilled guidance for a nominal fee with no hidden costs. Advantages of using a mediator in a negotiated agreement:

  • They bring impartial and focussed outlook while drawing the negotiated agreement.
  • They draw the negotiated agreement and maintain all documents pertaining to it.
  • They may have previous experience in handling the creditor.
  • In multi-charged disputes, they can help by acting neutral and therefore smooth the communications between the parties involved in the negotiated agreement.
  • The parties can concentrate on other issues while the agency can sort all the minute details of a negotiated agreement.