Bankruptcy and self-employment

gone_awol · 14 August 2008 at 7:21PM

Hi everyone - I've been lurking on the forum for a while and gaining much strength and hope from you all.

Has anyone experienced going bankrupt if they are self-employed? There are no employees, it's just me - no partner. The debts are on credit cards and are partly business related and partly personal spending, all mixed together as I've been juggling cards to get the best rates - time is running out though and soon I won't be able to pay the minimum. I don't earn a lot from the business, I also have a part-time job and am also on benefits.
Just wondered if anyone has had any experience on the self-employed aspect - If I do decide, is it more difficult to go bankrupt and how is it different than if I was working full-time? And is the process different than normal?
Many thanks for any help.

gone awol (or thinking of it!)

debt_doctor · 14 August 2008 at 9:02PM

Hi,

As you are a sole trader then allyour business debts are personal debts aswell, so going BR is exactly the same as for any one else.

If your business is viable then you will probably be able to continue it ( if you want to ), but if it is a business that runs on credit then that would be very difficult ( £ 500 limit )

DD

gone_awol · 14 August 2008 at 9:59PM

thank-you DD. It doesn't run on credit, so hopefully I can continue - that's good to know.

HEADACHE · 16 August 2008 at 9:37PM

sounds like you can continue.Im in the self employed position,have a business and don't need credit.Ive continued after BR,all they're concerned about is BR's running up fresh debts which is understandable.At the end of the day,work as hard as you can,make as much as you can,cos the OR or anyone else won't care a damn about you or give you any money.
Be bold,be brave,be positive.

HEADACHE · 16 August 2008 at 9:41PM

DON'T GO BANKRUPT DD!! DON'T JUST DON'T!!.If your debts are credit card debts then negotiate hard and repay them a token amount per month,say £20 per month.BANKRUPTCY IS HELL,I HAD SO MANY SUICIDAL THOUGHTS AND IT PUSHES YOU FURTHER INTO DEBT AND IS LEGALLY SETUP TO KEEP YOU IN POVERTY.Your name will appear in the paper,you'll be grilled by a civil servant,made to feel like a loser.DON'T GO BANKRUPT,JUST WORK OUT A REPAYMENT PLAN WITH YOUR CREDIT CARD COMPANIES.

gone_awol · 17 August 2008 at 9:01AM

Does anyone know what to say to headache on this thread? (S)he seems confused.
http://forums.moneysavingexpert.com/showthread.html?t=1096603

I wondered how different people cope with the mental strain of going bankrupt. The practical matters are different for everyone, that's why I'm trying to get educated beforehand and why this forum is such a godsend. Thankfully I'm not suicidal, though I was 2 years ago when I lost my house trying to pay it all off. It wasn't enough and I've been trying to keep myself above water ever since. I've made mistakes but who hasn't. It'll be embarrassing seeing it in the paper, but thankfully I have wonderful friends and my family, and though they won't be impressed, they love me and support me - everyone else can mind their own bloody business. They system is set up to allow people to draw a line and if that's what it comes to - then so be it. Part of my debt is due to business and part due to borrowing irresponsibly but the lending practices of the credit card companies is also irresponsible - I can see this more clearly now. The majority of experiences on this board seem to reflect being treated well by the officials (though the creditors are a whole different matter!). I have to accept my fate and my failings and most importantly, learn, so it never happens again and I keep reminding myself that I am more than my debt. The whole system is built on keeping people petrified - and it works. In being able to see what the real process and the consequences of bankruptcy are via this forum I've been able to get my head out of the sand. So thank-you to all the posters and the regulars - you've no idea how much it's helped.

gone awol (or thinking of it!)

HEADACHE · 17 August 2008 at 9:12AM

Ok,so there are situations when BR is the only,say if you have massive debts,no income and extreme circumtances.
But if you have an income and are suffering with aged debts (credit cards) surely the best thing is to work something out?

Richard_S · 17 August 2008 at 9:28AM

debt_doctor wrote: »

Hi,

As you are a sole trader then allyour business debts are personal debts aswell, so going BR is exactly the same as for any one else.

If your business is viable then you will probably be able to continue it ( if you want to ), but if it is a business that runs on credit then that would be very difficult ( £ 500 limit )

DD

Hi Debt doctor,

Isn't the law on obtaining credit whilst an undischarged bankrupt, that you have to inform a lender, or if self-employed a trade creditor, if you apply for credit of more than £500?

I was under the impression that you can obtain credit facilities over £500 providing the lender is informed of the bankruptcy.

Rich

fermi · 17 August 2008 at 9:36AM

You are right Richard I think. Although in practical terms it's going to be difficult whatever.

Obtaining credit whilst undischarged from bankruptcy

If a person subject to a bankruptcy order wishes to obtain credit to the extent of the prescribed amount or more, either alone or jointly with another person, he/she must disclose the fact of his/her bankruptcy (or that his/her estate has been sequestrated in Scotland) to the person from whom he/she seeks to obtain credit. The prescribed limit is currently £500 and failure to disclose the fact of his/her bankruptcy will render the bankrupt guilty of an offence. The official receiver should note that, although credit might have been incurred contrary to the law, it is still a valid post-bankruptcy debt for which the bankrupt remains liable.

The £500 limit is a single transaction with one lender, but once the bankrupt has reached or exceeded that £500 limit with one lender and “triggered” the offence, then any other amounts borrowed (i.e. the total debt accumulated by the bankrupt) would need to be taken in to account. For example, if the undischarged bankrupt never borrowed more than £499 from the same lender, he/she would not trigger the offence, but as soon as the credit obtained from one lender reaches £500 or greater (which may comprise accumulated unpaid smaller amounts from the same lender), then all other credit transactions obtained from any lender by the undischarged bankrupt, would be taken in to account in any action taken against the bankrupt, even if in themselves, these other amounts are less than £500.

Obtaining credit is specifically stated to include cases when goods are bailed under hire-purchase agreements and conditional sale agreements and also to include payment made to the bankrupt in advance for the supply of goods or services

fiveyearplan · 17 August 2008 at 9:47AM

Hi Gone Awol. What is your total amount of debt? I was self employed and went BR and am still running a business. I buy everything cash now and am happy doing it that way. There are times when my cashflow has been bad but now I insist clients pay me in cash to alleviate this. It seems to be working just fine.

Bankruptcy is NOT a trap to keep people in poverty - quite the opposite - you just have to look at the thread 'bankrupts past and present' to see. In fact most entreprenuers (sp??) have been there, done that and moved up.

gone_awol · 17 August 2008 at 10:44AM

Thanks for the responses, it's really helpful to know what the options are. I won't need credit to carry the business on, it's more a paying hobby, so I shall just buy supplies when I make sales. (and honestly if I never see a credit card again it'll be too soon!)
At the moment the sales are low but I'm hoping this will improve. If I did go bankrupt (believe me I'm trying everything so I don't have to but...) I assume they use your previous years accounts to work out if you have any surplus (I don't). But how does it work after BR do you submit your accounts to the OR (monthly, annually?) and I also assume they take your net profit (after you've paid for your supplies, NI, etc) when working out your income from the business, using this net profit to determine if you have to pay any IPA or IPO. I don't mind paying part of any surplus back (on the contrary, as long as I have enough to live on) I'm just trying to get clear on the process. I am going to the CAB soon to talk about my situation, just trying to educate myself as much as possible in the meantime.
FYI I have £12,000 credit card debt and £5,000 unsecured loan.

thanks again

gone awol (or thinking of it!)

Bankruptcy and self-employment

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