People come to me in one of two states: either "we will say nothing until they demand it", or "let us write them a letter saying that times are hard". Neither works. Talks about an instalment plan are a conversation conducted in figures, and you have to prepare for them exactly as you would for a sale.
What to bring to the conversation
The creditor needs to see three things.
First: how much you can pay and out of what. Not "we will do our best where we can", but a payment calendar for the quarter ahead, week by week, with the source stated for every receipt: deliveries under named contracts, collection of receivables, seasonal growth. Thirteen weeks is not a random number. It is exactly one quarter: the horizon over which cash can still be mapped week by week without guessing, and one that contains a full tax cycle, every payroll date and every loan instalment. Banks and large creditors read a thirteen-week calendar without explanation, and the mere fact that you have one is already an argument: they are dealing with someone who is managing the situation, not asking for a deferral at random.
Second: what happens if he refuses. This is not a threat, it is arithmetic. How much he will recover through enforcement: allowing for the time the court takes, the enforcement proceedings, the discount on any sale of assets, the likelihood of insolvency and the order of priority. In most cases the figure works out at less than half the debt, and it arrives eighteen months to two years later.
Third: what backs your promise. Security over assets, a guarantee from the owner, a schedule with a penalty for late payment, a right of direct debit, control over turnover through an account with his bank.
The creditor makes his decision on the relationship between those three numbers, not on the tone of your letter.
What to put on the table
There are several structures that work, and they can be combined.
Deferral — moving the whole payment date back. Suitable where there is a clear date on which money will come in.
Instalments — splitting the amount into parts. This is the main instrument.
Changing the order of application of payments — principal first, interest afterwards. For the creditor this is a worsening of his position, so he will ask for security in exchange.
Waiver of part of the contractual penalty on condition that the principal is repaid on time. This is the most common deal of all: a creditor rarely expects in earnest to collect the whole penalty and is happy to trade it for discipline on the body of the debt.
Transfer of assets in lieu of payment — handing over property instead of paying the debt. It closes the question quickly, but it requires an honest valuation: an inflated valuation is later challenged by the insolvency officeholder.
Novation — replacing the obligation with a different one, for example a supply of goods.
How an instalment plan differs from a settlement agreement
Before proceedings, it is an agreement between the parties, a civil-law transaction. Its advantage is speed; its drawback is that if it is breached the creditor goes to court starting from scratch.
A settlement agreement in court proceedings is approved by a court ruling and has the same force as a judgment: if it is breached, a writ of execution is issued immediately, without a fresh case. Creditors often prefer this option, and for the debtor it is no worse: the terms are the same, and there is more trust.
A settlement agreement in insolvency proceedings is a separate matter. It is approved by the meeting of creditors and by the court, and it terminates the procedure. It is a heavy structure, but it allows you to reach terms with everyone at once.
How to prepare
First, your own picture: a full list of creditors, amounts, deadlines, security, and which of them have already gone to court.
Next, priorities. Not all creditors are equal: debts to the budget and wage arrears are more dangerous than the rest, because they give grounds for proceedings to be started from outside and for the director to be held personally liable. A secured creditor is stronger than the others. A supplier your production depends on matters more than a bank when it comes to survival.
Then a script for the conversation with each of them: what you are offering, what secures it, what you are prepared to give up, and where your red line is.
And only then the letters. A letter without a calculation is a request, and a request is easy to refuse.
What makes the conversation hopeless
Promises with no figures behind them. Six months of silence followed by an instalment proposal a week before the hearing. Selective payments that the creditor learns about from a counterparty's bank statement. Stripping assets on the eve of the talks — this comes to light quickly and closes the subject for good.
And one more thing: if the owner buys himself a car while all this is going on, the talks are over. Creditors do not look only at the accounts.
When an instalment plan is not the answer
If operating cash flow has been negative for the second or third quarter running, an instalment plan only postpones the ending and increases the debt. Then the conversation is a different one: selling part of the business, closing down lines of activity, a controlled insolvency.
The difference between these two situations lies in the figures, and an evening of calculations is enough to see it. It is worth going to your creditors when you know exactly what you will be paying out of.
About the director's deadlines
A separate reminder: if it is obvious that you will not be able to pay everyone, the director has one month to file an insolvency petition. Missing that deadline is a direct ground for personal liability for debts arising afterwards. Talks about an instalment plan do not stop that clock running.
I set out how pricing works in my first reply, before any work begins.
I provide legal services through the company Kovalev & Partners LLC — kovalev.moscow. As a mediator I do not advise one individual party to a dispute.
