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Using winding up to get your debt repaidRecent figures indicate that Great Britain moved out of recession in Q4 2009. Most people however believe that the recovery will be slow and prolonged.With a fragile recovery it is likely that creditors will continue to use winding up petitions as a way to collect outstanding debt. It must be noted however that the costs of winding up are not insignificant and may be a risky strategy.In the coming months, it will be very important to maintain cash flow if the a company is to continue in business. This task will be made all the more difficult as customers demand longer and longer payment terms. Many businesses will be suffering their own cash flow problems and will therefore pay late or not at all.One way to try and collect overdue debt is to issue a winding up petition against the company who owes you money.The threat of a winding up petition may be enough to get the debt repaid. This is because a winding up petition will cause the debtor major difficulties. Once a winding up petition is issued, the company will normally find their bank account will be frozen making it very difficult to trade. They will incur cost fighting the petition or risk the closure of their business.However, before considering taking action to wind up a company, it is important to understand the potential costs.Costs can increase up to GBP2000 with no guarantee of paymentFirst of all, it is impossible to apply for a winding up petition without first having issued a statutory demand for payment. This would have to be arranged through a solicitor at a cost of between GBP150-GBP200.If payment is not forthcoming in 21 days, a winding up petition can be applied for at the High Court. The solicitor's costs for this application will normally be between GBP 1,500 and GBP 2,000. However, there is no guarantee that the High Court will issue the petition.A petition will only be issued if the court is convinced that all other reasonable methods of collecting the outstanding debt have been exhausted.If the winding up petition is granted, this can only be lifted of the company pays its debt or makes a suitable arrangement for payment. However, if it is unable to do this, it would be wound up. If this happens, the creditor who originally petitioned for the winding up will be treated as an unsecured creditor and is very unlikely to be paid.The use of the winding up process can be an extremely effective method of debt collection. However, it is not without cost and there is no guarantee that the outstanding debt will be paid, especially if the debtor in question is actually wound up. As such, the use of this process must be carefully planned and thought through. Article Tags: Using Winding, Debt Repaid, Outstanding Debt
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