An alternative method of managing fee debts - December 08
Due to the ongoing ‘credit crunch’ you may discover that more and more parents find themselves in a situation whereby they are unable to pay outstanding school fees as they fall due.
In such a situation it is often difficult for Bursars and Heads to determine the best way to proceed. On the one hand the school may not want to employ draconian debt recovery methods against parents who are in genuine financial difficulty and have every intention of paying the fees once they have the funds to do so. However on the other hand the school must recover the debts owing to it, especially in such difficult times.
Arrangements to pay fees by instalments may be workable to a degree, but in circumstances such as these the likelihood that parents will default is significant, even where they have every intention of maintaining the arrangement at the outset. Where parents own their home, or indeed any other property, a Voluntary Charge over that property is a very good way of protecting your position.
A Voluntary Charge has the advantage of securing the fees owed to you until such time as the parents’ situation improves and they are able to pay your fees or until the property is sold and the fees are discharged directly from any proceeds of sale, subject to there being sufficient equity in the property. In addition you will also be able to add interest on the principal amount and seek to recover your legal costs incurred in the preparation and registering the legal charge at the Land Registry. However even if the parent’s financial situation should drastically deteriorate and the possibility of Bankruptcy become a factor, were the worst to happen you would rank as a secured rather than an unsecured creditor and the chances of recovering the outstanding sum would be much greater.
Of course this option is reliant of the co-operation of the parents in question but, provided that this is forthcoming, a Voluntary Charge is a straightforward method of securing your position.
For further information or to discuss any of the issues discussed in the ebulletin, please contact:
Colin Gibson
Partner and Insolvency Practitioner and Head of Debt Recovery
T 01242 246453
E colin.gibson@rickerbys.com
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