Can anyone Help please?

smiler71_2

Hello

I have had some fantastic advice from this site over the last few years and was hoping someone can help me with a somewhat complicated question. I’m not sure if this is the right place to post this, but hear goes anyway! I experienced some major financial difficulties in 2006/7 which resulted in me declaring myself bankrupt in October 2007, and subsequently discharged in early June 2008. A big part of my financial difficulties arose from a business I owned along with my partner (Ltd Company, both directors) that had experienced financial problems for a year or so previously. However, prior to my bankruptcy the business had started to making some profit. Both my partner and I sought professional advice from an Insolvency Practitioner prior to my bankruptcy. The IP advised my partner to enter into an IVA and have his parents take a deed of assignment over his half of the equitable interest in our home to pay his creditors. I did not have any equitable interest in the property as one of my creditors had obtained a second charge for the full amount of my equity. Obviously my only alternative was to declare myself Bankrupt and resigned my directorship of the company which I did.
Due to the financial climate the business has once again got into some difficulty, and on the advice of his accountant my partner has decided to call it a day and close the business. He received some interest from a third party to take over the lease and sold the fixtures for a small sum of £2000 which was used to pay off electric, water, business rates etc. the business bank account was left with a deficit of £5500. Both my partner and I have now received letters from the bank stating we signed a personal guarantee (debenture) for the outstanding money. I was aware that we had signed a debenture in 2004 when we took out a small business loan but was of the understanding it was for that alone. I checked the Companies House website and purchased a copy of the debenture and it says “all moneys and liabilities whatsoever, whenever and howsoever incurred by the Company whether now or in the future”. So that obviously means that this debt is now personally owed by us. Neither my partner nor I are in the position to pay this money back at the moment, my partner is in receipt of benefit, and I am a full time student.

The bank is adding interest charges at an extortionate rate, £200 in the last week!
My partners parents are in a position to loan use £2800 which I have offered to the bank in full and final settlement, haven’t received a reply yet.
What I was wondering however is would I still be liable for the debt as the debenture was signed prior to my bankruptcy? At the time of the bankruptcy I didn’t make any connection regarding the Ltd company debt and my personal debt as I had resigned my directorship and the fact that it was Limited. Does anyone know where I would stand on this matter?

Thanks again.

Richard_S

Hi smiler,

Any personal guarantees made before the date of your Bankruptcy Order will be included in your bankruptcy so you are not personally liable. Its irrelevant that they weren't included in your list of creditors; that's why the I.S post bankruptcy notices in the local media.

How that affects your partner or your house, I'm not quite sure without you posting more details.

Regards

Richard

smiler71_2

Thank you so much for your help.

I'm not sure what other details you would need regarding my partner? As I said He entered into an IVA, he had a very good IP who advised him to release his half of the equity in the property by way of a Deed of Assignment made to his parents at the onset of the IVA. As he didn’t have any significant surplus in his/our income the IP offered his creditors a one off lump sum from the equity without any monthly payment order, this was accepted by the majority of his creditors so the IVA was completed very quickly, less than a year. Again the business overdraft was not included fort the same reasons it wasn’t included in my bankruptcy i.e. was a limited company, and as far as we were aware the debenture/personal guarantee was for a business loan that had almost finished. We weren’t aware of the wording of the debenture which included “all moneys owed by the business now or in the future………”.

I should imaging that our home has very little equity, or may even be in slight negative equity when including the original mortgage, second charge taken in respect of one of my own debts, and the Deed of Assignments that my partners parents have, particularly in the current economic climate.

Does an IVA follow the same principles as the bankruptcy in that it covers all debts whether they are included in the IVA or not?

Does it also make any difference that the debt at the time of my bankruptcy, and my partners IVA was a business debt not a personal debt, only becoming personal via the debenture now that the business no is no longer running?

Thanks again, I appreciate your help.

Richard_S

smiler71 wrote: »

I should imaging that our home has very little equity, or may even be in slight negative equity when including the original mortgage, second charge taken in respect of one of my own debts, and the Deed of Assignments that my partners parents have, particularly in the current economic climate.

Does an IVA follow the same principles as the bankruptcy in that it covers all debts whether they are included in the IVA or not?

Does it also make any difference that the debt at the time of my bankruptcy, and my partners IVA was a business debt not a personal debt, only becoming personal via the debenture now that the business no is no longer running?

Thanks again, I appreciate your help.

Hi Smiler,

I don't know whether the IVA covers the debt that originated with the business borrowing but I think there's a good chance it does. Your partner really needs to speak to an insolvency expert about that; his original I.P perhaps?

A Bankruptcy Order covers all debts whether realised or contingent up to the date of the B.O, but you may have difficulty convincing the bank of that. It might be worth contacting the O.R from your bankruptcy and asking them to clarify the situation, and hopefully write to the bank on your behalf.

We have a very similar situation in that our ex business bankers won't accept that the monies owed by our company, and secured by our personal guarantees, cannot be enforced after the date of our B.O's.

On the plus side, if there's no equity in your house there's a limit to what the bank can do to recover the debt, and you may well find that after a while they stop chasing you for it. The last correspondence I had with our bank was in January, when I invited them to pursue legal action and we'd let a Judge decide.

I hope you can get it resolved quickly because I know exactly what it's like with something like that lurking in the background.

Regards

Richard

EDIT: I wouldn't under any circumstances consider borrowing money from relatives unless it's as a very last resort, with all other options exhausted.

smiler71_2

Thank you for your help Richard, much appreciated!

smiler71_2

Well, OH spoke to the IP firm that sorted his IVA and unfortunately it doesn't cover this debt. Apparently as it was not actually a 'debt' at the time he entered into the IVA, it's not covered retrospectively. Unfortunatley the Bankruptcy rules are not of much use now as they will just enforce the debt solely on my partner.

smiler71_2

Do you think we should continue with the full and final offer? Not sure if they will accept it? The offer we made was for 40% of the debt. We included an income/expenditure as well that shows we don’t have any disposable income to make a regular monthly payment.

One thing I was thinking, not sure if anyone has any knowledge of business loan credit agreements that can help with this question? The original loan that this personal guarantee related to was taken out in 2004 with a PPI attached that we didn’t want, but was told we had to take or wouldn’t get the loan. About 18 months ago I successfully reclaimed the PPI, HSBC wouldn’t simply deduct it from the original loan so said we needed to start a new one minus PPI. Obviously with our blemished credit history they had a little problem agreeing the loan. Bank manager said as they accepted PPI was sold unfairly the onus was on them to ensure the loan was available. The day my partner went to the bank to sign for the transfer to take place there was no agreement so the transfer went ahead without any signature. We never did see, or sign any agreement, and the loan finished about 9 months ago. I was wondering if we could use this as a way of improving our chances of the full and final offer being accepted. The way I see it if there was no agreement and definitely not a signed one the money was taken unlawfully. Again, I know business loans do not afford the same protection as CCA loans so not sure where we would stand. Obviously I don’t want to rock the boat with them if it’s a no go. Anyone know where we stand with this?

Thanks again

fiveyearplan

I'm not sure I've read everything correctly. Is the total outstanding debt £5,500? Does your OH have any personal debt on top of that? If the total debt (apart from secured loans) is just the £5,500 then I would proceed with the F&F. If he has more debt though it might be throwing good money after bad though. I think a complete business/personal SOA would be needed to get a full picture.

I agree with Richard though, your part of the debt would have been included in your bankruptcy. I am however a bit worried about the agreement taken out subsequently.

smiler71_2

Hi and thank you for your help.

No the £5500 is the only debt he would have as all his other personal debt was taken care of with the IVA in 2007. This debt is made up of business overdraft and business credit card, and in 2007 when he entered into the IVA the business was solvent. It’s only lately that the business has become insolvent and therefore closed which has made the debt personal through the personal guarantee.

I’m not sure what you mean “I am however a bit worried about the agreement taken out subsequently”. Do you mean the replacement loan arranged after the PPI reclaim? This loan was/would have been in my partners name only, thinking about it I may have my dates mixed up, can’t remember if it was taken out pre or post IVA, would need to get the bank statements out, it’s such a long time ago I may be wrong. Also, it was only taken out as that was the only way the PPI could be paid back to us. It wasn’t his choice but the banks. However, it was completely paid off in full some time ago. What I was wondering is whether the money was taken without authorisation as such as my partner never even saw let alone signed an agreement. I was hoping to point this out to the bank in an attempt to make the full and final more acceptable to them. But as I said, I don’t want to rock the boat if there is nothing we can legally do in respect of the loan.

Thanks again

fiveyearplan

smiler71 wrote: »

Hi and thank you for your help.

No the £5500 is the only debt he would have as all his other personal debt was taken care of with the IVA in 2007. This debt is made up of business overdraft and business credit card, and in 2007 when he entered into the IVA the business was solvent. It’s only lately that the business has become insolvent and therefore closed which has made the debt personal through the personal guarantee.

I’m not sure what you mean “I am however a bit worried about the agreement taken out subsequently”. Do you mean the replacement loan arranged after the PPI reclaim? This loan was/would have been in my partners name only, thinking about it I may have my dates mixed up, can’t remember if it was taken out pre or post IVA, would need to get the bank statements out, it’s such a long time ago I may be wrong. Also, it was only taken out as that was the only way the PPI could be paid back to us. It wasn’t his choice but the banks. However, it was completely paid off in full some time ago. If it was paid off in full then it is okay. I thought this was still an outstanding debt. What I was wondering is whether the money was taken without authorisation as such as my partner never even saw let alone signed an agreement. I was hoping to point this out to the bank in an attempt to make the full and final more acceptable to them. But as I said, I don’t want to rock the boat if there is nothing we can legally do in respect of the loan.

Thanks again

If the loan was paid back in full thats fine. If however the 'agreement' was taken out post IVA/BR then I wouldn't have thought it would be included. I know what you mean about having to do another agreement - I had to do the same with a barclayloan after I cancelled my PPI.

Richard_S

Hi Smiler,

I can see the logic of the I.P's opinion that the business debt isn't included in your partner's IVA because the company wasn't insolvent at the time; it does seem to follow the logic of debt and bankruptcy.

However, if the original loan was redeemed because of your claim for PPI and you never signed the new agreement, then how can the bank enforce the agreement? I appreciate banks always seem to have a clause somewhere that "snares" you, but I'd definitely fight that all the way.

Ask them for a copy of the personal guarantees and the terms and conditions of the loan. I would tell them that your solicitors have requested copies because they don't think you have a case to answer. It could ultimately prove to be fruitless if they can prove liability but it'll give them the impression that you're not going to be intimidated.

As an absolute last resort make a F&F offer but not until you've exhausted every other alternative, and keep it low; start at 20% and refuse to budge. Explain that you can only raise it from friends and family and their means are limited and their "vig" extorionate.:eek::eek: Be prepared to settle at whatever you feel comfortable with, but I wouldn't go above 30%. Forget about the added interest and fees because they'll always ignore that if they stand a chance of getting a reasonable %age of the original capital back.

In 2005/06 we owed our bank somewhere in the region of £100k and when things started to go wrong they agreed to accept 25% of the total outstanding over 7 years (can't remember the exact amounts or terms). In the end it was a pointless exercise in negotiation because some second rate property company petitioned for our bankruptcy. Good for us, very bad for them.:D

One thing to bear in mind about banks is they'll always negotiate; it may take a while to get to a decision maker, but be persistent and ultimately you will. Quotes from the banking manuals: "£1 today is worth more than £1 tomorrow" and "our first loss is our best loss".

Other than anecdotal evidence (experience), two of our close friends manage four branches of high street banks; talk about the enemy within.:eek::eek:

Richard