Browse Credit and Lending

Deed of Arrangement

A Deed of Arrangement is a written agreement between a debtor and his or her creditors, registered with the Insolvency Service, to manage and compose debts or arrange the debtor's affairs.

A Deed of Arrangement is a legally binding agreement between a debtor and his or her creditors to resolve outstanding debts without resorting to bankruptcy. This type of arrangement is registered with the Insolvency Service and can include a composition of debts or a scheme for managing the debtor’s financial affairs.

Composition of Debts

A composition of debts involves creditors agreeing to accept a partial repayment of the total debt owed by the debtor. This partial repayment is considered full settlement, thereby discharging the debtor from further liability.

Scheme of Arrangement

A scheme of arrangement includes reorganizing the debtor’s financial affairs to make repayments more manageable. This could involve extending the repayment period or restructuring the debt.

Detailed Explanation

A Deed of Arrangement allows debtors to settle their debts while avoiding the stigma and legal repercussions of bankruptcy. By negotiating with creditors, debtors can propose a plan that addresses how and when the debt will be repaid. The process involves drafting the deed, gaining approval from a majority of creditors, and then registering the deed with the Insolvency Service.

Importance

  • Provides an alternative to bankruptcy.
  • Helps maintain the debtor’s credit rating.
  • Facilitates manageable debt repayment plans.

Applicability

  • Suitable for individuals facing financial difficulties but wanting to avoid bankruptcy.
  • Can be used by business owners looking to settle debts without liquidation.
  • Insolvency: A financial state where an individual or organization cannot meet its debt obligations.
  • Bankruptcy: A legal proceeding involving a person or business that is unable to repay outstanding debts.
  • Individual Voluntary Arrangement (IVA): An alternative to bankruptcy for individuals, allowing for a formal agreement with creditors.

FAQs

Can a Deed of Arrangement be altered once it is agreed upon?

It can be altered only with the consent of all parties involved and must be re-registered with the Insolvency Service.

What happens if the terms of the Deed of Arrangement are not met?

Failure to adhere to the terms can result in creditors seeking legal action to recover the owed amounts.

How long does the Deed of Arrangement remain in effect?

It remains in effect until all agreed-upon terms and payments are fulfilled, typically within the timeframe stipulated in the deed.
Revised on Monday, May 18, 2026