This is not a formal insolvency procedure and there is no court involvement.

This option is most appropriate where the debtor has only a small number of creditors who are supportive of the debtor.

The main disadvantages of negotiated agreements with creditors are as follows:

• They are not legally binding on creditors, unlike an Individual Voluntary Arrangement (“IVA”) for example.

• Even if a creditor initially consents to a negotiated agreement, he may decide to change his mind after the agreement has been in place for some time.

• The debtor remains liable to repay the full amount of the debt and this could take a long time to clear if repayments are small, and interest charges may be accruing during this period.