Can a discharged bankrupt be a company director?

SRJ999 · 18 January 2010 at 3:22PM

This has all made very interesting reading. This is also my first post and covers a subject for which I believe I will soon be experiencing first-hand. I apologize for any appearance of self-pity in the post. It's not intentional and I am now expecting there to be some light.

Having had a well-paid engineering job until Feb 2009, I had built up some debts (via loans & credit cards) which were, at that time, controllable. Having been a victim of a mass redundancy, I was horrified to find out just how far and fast I fell. Going from a healthy salary cheque to a minimum wage one, I found myself into deeper and deeper trouble.

I was (and still am) a director of a limited company in order to get the engineering post but when it all went belly up, I naively assumed I'd find another job quickly, so kept the company registered. That was mistake number 1. By keeping the company open, I am still liable for a £3500 Corporation Tax bill which, had I closed the company and made myself redundant, would not be applicable.

I spent three months sending off endless job applications, during which time the little money left in the business account was swallowed up as I paid the rent and frugal living expenses. I eventually found a night shift shelf-stacking job, for which I earned about a third of what I had been used to.

I had five major creditor issues; my bank overdraft, two loans and two credit cards. Total debt was in the region of £20K. Having initially spoken to the CAB, I was advised to go bankrupt immediately. Having the upbringing I did, this was not even a consideration for me. That was mistake number 2.

I subsequently contacted the CCCS, who have been enormously helpful. They helped me create a financial statement which, along with a letter template, I sent to all my creditors, offering a short-term token payment schedule of £2 per month. To date, all but one agreed to the offer.

The last creditor, Egg, has not been so amenable. The last decent-sized payment I made to Egg was in April, when I paid about £300 off a £5K debt. I was unable to make further payments until I set up a £2 per month standing order to each of my creditors.

In September, Egg passed the case to a debt collection agency, CD (UK). In my last phone conversation with CD (UK), I explained that my financial situation had not altered since they first contacted me in September. I told them I was paying all I could until I found better paid work. In response, CD (UK) advised in December that, unless I paid the entire debt within a week, they would take me to court. It appeared that neither Egg nor CD (UK) believed my financial statement to be a true reflection of the facts. After seeking legal advice, I wrote back telling them to stop phoning me as it constituted harassment. I said that if they persisted, they would leave me no choice but to take the bankruptcy option, which would mean they wouldn't get a penny.

I received a letter from their solicitor last week, giving me seven days to pay up or face court. I am now making arrangements to speak to my solicitor again to see what my next step should be. I will also contact my accountant to see if I must close the company or if I can resign as a director and pass the reins to someone else.

The reason for spilling all this out is that I have learned some fantastically hard lessons along the way:

1. If you have a one-man company and the works dries up, CLOSE THE COMPANY.
2. When you close, pay yourself redundancy and advise HMRC.
3. Do NOT avoid contacting your creditors. I have lost count the number of sleepless nights I have had, not to mention the weight loss. Speak to them immediately and explain.
4. Get debt advice before it gets as out of control as mine did.
5. Do not be afraid of the B-word. I'm still trying to convince myself about that one.

I looked on this thread because I was worried about how long I would have to wait until I could become a director again, should I bite the bullet and go bankrupt. I had been led to believe that it could be 3 years after I was discharged. If it is actually as soon as I am discharged, then bankruptcy becomes an option.

I am sorry for rambling; this tale hasn't ended by a long way and my visit to the solicitor will help determine my next move. Whatever happens, good or bad, I am happy to provide an update. Seeing that I am patently not alone here, whilst not encouraging, does at least give me hope. Thanks for your time.

orc_2 · 18 January 2010 at 3:40PM

Good luck, I hope some positive news comes your way!!

Can a discharged bankrupt be a company director?

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