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Can a discharged bankrupt be a company director?
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# 1
skaboy
Old 23-01-2007, 2:15 PM
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Default Can a discharged bankrupt be a company director?

Hi all,

I'm new here but have been reading some of the threads and hope that my experiences might help others who've not had a B-day before.

My question is above but I'll relate my story, by way of an introduction and in the hope that it might give any pre-BR-ers some insight.

My first encounter with credit was when I was 18 and needed a lot of dental work done (2500). The only way of paying was to get credit cards. This I did, then I took out a loan to pay the cards off. The rest will be familiar to many of you reading this: the cards went back up, so I got more and so on.

For 16 years I was in debt. Towards the end, I had no fewer than 11 credit cards, two loans and an overdraft. My monthly salary just about covered minimum payments, so I was taking on more credit just to live. Credit was so easy to come by because so many offers of cards were landing on my doormat.

Eventually of course, I couldn't get any more credit. That's when I thought my world would end. I couldn't pay my creditors and I thought they'd come to my house and take all that I had away. In fact, I didn't have much to take: a TV, stereo and so on but most of my debt was simply due to living. Not living the high life but just getting by.

I fell into arrears on my repayments and eventually, my phone was ringing twenty or more times per evening. Shortly after that, I had my lightbulb moment and discovered the CCCS.

CCCS arranged a DMP for me, where I was repaying 410 per month and my creditors were mostly off of my back. This arrangement prevailed for a couple of years and then I met my wife-to-be, in July 2003.

Because I was paying 410 per month to CCCS, I couldn't afford to rent a place of my own so I was living at my parents' house. I was 34 years old! My wife-to-be and me lived there for ten months and got married in the meantime. We were planning a family and decided that it really was time for me to break free of my debts.

We moved into private rented accomodation in May 2004. The tenancy was in my name and I had to provide references (friend and employer) and was credit checked. Despite my poor credit history, I passed the latter as they do a relatively shallow check, of court registers for CCJs and fines. I had none of either. We thought it important to get into rented accomodation prior to my bankruptcy application.

I've seen a minority of people on this board suggesting that bankruptcy is the "easy way out": as the majority here will know, it's not. In my case, there have been far more positive aspects than negative but it's still a tough process for someone to have to go through. Shortly before my BR, I spoke to CCCS about the stigma that I was feeling: they pointed out to me that I'd effectively served a "sentence", with all my creditors hassling me for so long. I had suffered over a decade of stress and worry. Furthermore, of the 44'000that I owed to my creditors, around 20'000 was in payment "protection", late payment charges and interest. I fully admit that I may have been reckless but point out to any detractors that I've paid my dues. I may not have repaid my debts in full but I tried and I've paid in other ways, personally. But I digress.

I couldn't have gone through with it without my wife and she gathered all of my statements and paperwork together (it filled a rucksack) and completed the BR forms. I stopped paying CCCS and used the money to fund my bankruptcy application.

On 12th Novemeber 2004, with my wife eight months pregnant, we attended Croydon County Court and applied for my bankruptcy. For those that haven't gone through it yet, this is what happens:

At Croydon, there is no appointment system; you just turn up on the day, any time after 10am. We arrived at 9.30 and I was dressed in a business suit. I doubt that this helped me at all but it gave me a greater feeling of worth.

There's a waiting room for bankruptcies and we took up residence there, along with another couple who were there for the same reason. It was nice to talk to someone in the same predicament openly. There were some forms to complete, so we set about doing so.

At 10am, the desk opened and a clerk announced that she was there to deal with bankruptcies. I went up to the counter and she asked for my forms. I handed them over and mentioned that there were a couple of questions I wasn't sure of. She talked me through them nicely and completed the forms for me. I then paid my 450 and swore an oath on The Bible.

We then went to another room, where dozens of people were seated, presumably to join procedings in one of the many court rooms. My name was the first to be called and I was led to the judge's office.

Judge Mills was a district judge and his office was like that of a headmaster. I was expecting a courtroom but there was just me, the clerk and Judge Mills in the room.

On entering his office I greeted him in the same manner I would my old grammar school headmaster: "Good morning sir".

"Good morning Mr *****", he replied and asked me to take a seat. "So, 44'000 of debt and no assets: how is that?"

I gave a potted history of my situation and he read through my bankruptcy application. "Have you been bankrupt before?" he asked. I replied in the negative and can't help thinking that if I were there for a second time, I wouldn't be treated so leniently.

The judge could see that my debts had built up gradually over a long period and that I'd tried to pay them off. Those are a couple of factors that helped me. If my debts had been incurred recently and quickly, then I could have just been on a spree, or incurred debts through gambling. A judge can actually refuse a bankruptcy application, as it is the debtor that requests their own insolvency. Alternatively, the judge can accept an application but rule that the bankruptcy period be longer than the standard one year: up to fifteen years in fact.

He continued: "You do realise that if I approve your application, all of your accounts will be frozen immediately?" This includes your current account but I had already opened a basic bank account, which my wages were paid into. I replied that I understood. "If I sign this application, that is it: you are officially insolvent. Do you understand?" I replied that I did. The judge looked at the clock on the wall. "10.15am; application approved". He then rubber stamped my form and signed it.

"Thank you sir", I said and shook the judge's hand.

"Don't let me see you here again", he said, in a friendly but authoritive teacher-like tone".

"I won't sir", I replied.

The clerk then took me back to the last room we were in, where my wife was waiting (you have to go into the judge on your own). "All done", I said and my wife hugged me.

The clerk gave us a map, showing the location of the official receiver's office, where we then headed.

At the receiver's office, we were called at reception by a receiver's clerk, who took us to an office. We produced our paperwork (about a foot high pile) and the "interview" commenced. I placed the word in inverted commas, because it was more of an informal chat with a very nice young lady. She was very friendly and seemed sympathetic to our situation. Had my situation been different this might not have been the case. It seemed to me though that she saw in front of her a young couple, the wife heavily pregnant. She could see how long my situation had prevailed for, that I had tried to repay my debts and that I'd not been bankrupt before.

The clerk explained that, my application having been successful, all of my assets now belonged to the state: quite a sobering statement. I had visions of an official visiting our flat and clearing it out. I'd seen the episode of Eastenders where Ian Beale became bankrupt. In reality, there is neither the time nor resource to do this. I was asked if I had a car or any antiques of value, to which I answered no.

As I said above, I think that the clerk looked at us positively and that could be why our experience was relatively stress-free. She then said that was effectively it and that it was her job to advise the official receiver himself of any further action that may be required. She said that in our case, she would recommend no further action or investigation. Sometimes a bankrupt can be asked to contribute a monthly sum, if their income excedes outgoings by a certain amount but we were told that there wasn't sufficient money left after our outgoings and therefore we wouldn't be asked for any money.

I then suddenly had a thought: my job is in sales and occasionally I would earn commission, although this wasn't guaranteed. I felt obliged to mention it and will never forget the answer:

"You've got a baby on the way Mr *****, so you'll need any extra money that you may earn. I'll pretend I didn't hear what you just told me".

Obviously, we were worried about who would or could find out about my bankruptcy and it breaks down like this:

The bankruptcy is announced in the London Gazette, which is only read by lawyers and people offering "services" to bankrupts.

Employer: unless employed in certain financial roles, the official receiver is not obliged to inform an employer. For a period of up to three months, a bankrupt is exempt from income tax, with the money going instead to the receiver. A company's payroll will be made aware of this but will assume that there has been an Inland Revenue error which is being corrected. This is what the clerk told us.

Landlord: the official receiver is obliged to tell your landlord if you become bankrupt. In our clerk's experience, no-one has ever been evicted because of a bankruptcy, even though some tenancy agreements include a bankruptcy clause. In reality, landlords tend to view a bankruptcy in a favourable light as a tenant is less likely to fall behind on rent if they have no debts. It is the person who is made bankrupt and there is no adverse effect on an address. In our case, we had a short-term assured tenancy and the official receiver is not obliged to tell a landlord where this agreement is in place.

The clerk said that she would need to conduct a telephone interview at a later date. This happened about a week later and was just a check list of questions that I'd already been asked: had I been bankrupt before, what was the level of my debt etc.

And that was it! The clerk said that some of my creditors may continue to contact me and if they did, to quote my bankruptcy reference. I couple of them did and the reference soon saw them off.

Apparently, a meeting of creditors then takes place but I don't know if this is a physical meeting, nor indeed if one took place in my case. The fact is, I've heard nothing since. It takes a while before you can relax in the knowledge that no-one is chasing you anymore.

Eight months after my bankruptcy was approved, I gained an automatic early discharge. Obviously, I've not tried to gain any form of credit and I am aware of the restrictions placed upon a discharged bankrupt. I know that it could be tricky getting a mortgage and that I'll never be able to do certain jobs. I do think that us bankrupts get treated somewhat unfairly, as if we're not to be trusted, when the truth is that we're invariably honest individuals who made a mistake and paid for it.

So, that's my story and I hope it helps someone. I'm now 36 years old, our son is two and we're expecting a daughter next month. I'm in a very good job with a very good salary and we have a company car. I'm a former bankrupt made good.

I'm eyeing up my boss's job in the next year or so, which brings me back to my original question, way up at the top there: does my bankruptcy prevent me from being a company director?

Thanks in advance.
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# 2
Mike St Helens
Old 23-01-2007, 4:23 PM
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Hi there...

Thanks for the post, Just shows that there is always light at the end of the tunnell, no matter how hard the journey.

I dont think your BKY would affect you, your discharged. There are some professions theat ever being BKY may be no no.. but as long as it isnt one of them and your contract allows you, then i guess there should be no problem.

Im sure someone else will be along soon. I think Richard S would be able to answer you this better.

Mike
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# 3
Patrick
Old 23-01-2007, 4:29 PM
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Once discharged you can be a director without a problem.

(I'm an insolvency practitioner)
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# 4
worried123
Old 30-07-2007, 10:26 PM
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Skaboy

I have just read your story and it made me cry......

I hope that the birth of your new baby went well....New beginnings - a fresh start.....I wish you lots of luck and good wishes.....you deserve it.

Thanks for sharing that story.
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# 5
PixiePie
Old 30-07-2007, 11:10 PM
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Thank you for sharing, and for the honest and nice way you presented things. No doubt some do use BR to twist the system, but as you say, most of us are just people that had bad luck or made a mistake and are continually paying for it. It's very reassuring to know the entire process from the inside like that, makes me less scared once more of it. I wish you happiness health and success in the future, but then, you already have the success - bouncing back in the face of bad things....

The others have covered it, but imho I always like a tenth opinion on the matter....once discharged you can be a Co. Director no problems (unless it's also being one of the few banned things like financial do-dars), go chase the dreams
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# 6
rog2
Old 30-07-2007, 11:33 PM
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A very moving thread, showing how well you have coped with a very traumatic situation, and an example to the rest of us - well done.
In answer to your question - once you are discharged from bankruptcy you are free to become a director or even to form your own company should you so wish.
I am currently in the process of setting up, with a business partner, a limited company in which we will become joint directors, with equal shares in the business - I was discharged in April.
I am NOT, nor do I profess to be, a Qualified Debt Adviser. I have made MANY mistakes and have OFTEN been the unwitting victim of the the shamefull tactics of the Financial Industry.
If any of my experiences, or the knowledge that I have gained from those experiences, can help anyone who finds themselves in similar circumstances, then my experiences have not been in vain.

HMRC Bankruptcy Statistic - 26th October 2006 - 23rd April 2007 BCSC Member No. 7

DFW Nerd # 166 PROUD TO BE DEALING WITH MY DEBTS
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# 7
Posthinking
Old 31-07-2007, 1:48 AM
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You can even be a postie! Job checks were more stringent than for any I've ever done. Seriously, Very good luck to you Although I doubt if you're still reading. The post is 6 months old.

Last edited by Posthinking; 31-07-2007 at 1:53 AM.
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# 8
PixiePie
Old 31-07-2007, 2:34 AM
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Quote:
Originally Posted by Posthinking View Post
Very good luck to you Although I doubt if you're still reading. The post is 6 months old.
oh, more observant than me Post lol you get a gold star
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# 9
DanielJames
Old 16-01-2010, 10:12 AM
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Well it's virtually 3 years since skaboy wrote his post, and it is one of the most useful, and to a fellow former bankrupt, most touching I have ever read. Minus the kids and the beautiful wife, it's pretty much my story! And the follow-up posts have answered my question about company directing.

It's been surprising just how well I've been able to get back on with my life since going bankrupt. I also took on credit to pay basic living expenses after medical expenses and the tale is all too familiar; one credit card to pay another, to pay another, to pay another and so on and before you know it, you're making 1000 a month, with 950 of it covering the cards.

Since going bankrupt two and a half years ago, I've gotten my life back together (no more calls from Lloyds and Egg and Mastercard in the evenings!) and am very happily employed by a local council in social services/child protection. My career is going great guns, I'm undertaking a Masters degree as I can afford it at last and I'm now setting up a company for a self-employed friend to put his wages through - legitimately! But I wasn't sure if I could, despite being discharged. We're hoping that once I have my MA, we can use the company as a non-profit agency to employ social care workers and social workers and be able to place them in employment in the public and private sectors, with a view to it being an agency dedicated to getting it's workers the best pay rates with quality training courses for career development. I couldn't have dreamed of doing this before I went bankrupt tbh. It's not a problem-free way to go of course. It was only last month that the bank I bank with sent me a VISA card for my 'basic' account so I can purchase my shopping online! No overdraft of course. It's funny, before I went bankrupt, credit and overdrafts were things I thought were normal. Now, the idea of lending more than 50 (and then only from a trusted friend!) fills me with a dread I can barely describe! lol

This thread has answered my question, so thank you to all who have written on here.

Daniel
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# 10
maxmycardagain
Old 16-01-2010, 2:51 PM
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Ive got food in my belly and a licence for my telly......lol
Yarda Yarda Yarda
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# 11
sizzler
Old 16-01-2010, 6:18 PM
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A very intresting thread, good luck. I think the good people of the forum have answered what uou wanted to know.

Regards sizzler
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# 12
SRJ999
Old 18-01-2010, 2:22 PM
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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.
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# 13
orc
Old 18-01-2010, 2:40 PM
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Good luck, I hope some positive news comes your way!!
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