Businesses Shadowed by Debt
It can be a downward spiral for companies when they find themselves in out of control debt. The inability to pay can often lead to bankruptcy. More importantly, if a company cannot pay back its loans, the banks then suffer. Recently AIB conceded that its bad loans sum up to a whopping 4.3 billion euro, and that shares in the bank have tumbled by 11%. Earlier this year, property titan Paddy Kelly told the Commercial Court that he is exploring the possibility of bankruptcy. And now it is being speculated that since Kelly has taken the step there will be a flood of other indebted developers coming forward and filing for bankruptcy. James Treacy of credit bureau BusinessPro said, “If he's leading the pack, it might set a precedent.” This circumstance is no doubt a result of the world's failing economies.
<a href="http://www.thecompanyshop.ie/">Company formation</a> should certainly take into account the possibility of bad debt when applying for loans, for instance, to support the business' initial formation. When speaking of the likelihood of bankruptcy becoming more common, Barry O'Neill, head of corporate recovery at Eugene F Collins Solicitors said, “I would expect a sharp increase in the amount of activity for different reasons, mainly because the number of people with ostensible wealth has increased and those people, in a personal capacity, owe a lot of money.” Unfortunately the process of filing for bankruptcy in Ireland is a lengthy and difficult process, it often occurs that the creditor recovers nothing after spending a large amount of time and money.
But it must be stated that bankruptcy is the last resort of a person or company who ultimately have no other way to escape their debt. There are always alternatives for those with reasonably low-level debt. Examinership might be pursued, whereby those in debt get the protection of the court and then make a proposal to their creditors on how
they might pay back as much as they can manage out of what is owed. Potential business people might take note of the misfortune of those previously successful companies that have since lost millions, practicality is the key in avoiding, as much as is possible, unnecessary debt.
Lorraine McInerney is currently working as a Freelance Web Content Article Writer. She has an Arts Degree in English Literature and Ancient Classics, and she is currently a post-graduate student of English, specializing in Post-Colonial Literatures. She will be writing her thesis this summer on "Liminality in Post-Colonial Women's Writing”.
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