What if there IS no money?

grassit

I have been reading these posts for some time now to help a friend, but I have one question that hasn't appeared before.

If a company is owed money and they make you bankrupt, what happens to the debt if there really is no money to pay off the debt?

Do companies apply to make you bankrupt on the assumption that you do have cash/assets? But if their assumption is wrong, and there really is nothing, what happens to the debt - is it written off, does it linger until you might come into money?

BTW, the advice given out in these threads is excellent and there is always (most times) a positive view given to help out.

tigerfeet2006

If there is no money then the company will not get a penny, zilch, nada, none, ever, never

skylight

Companies rarely make you BR. The exceptions are HMRC, Councils and Amex. Private companies sometimes do to.

The debt is never written off, as such. Your liability to it is though. So at the BR point, the ORs take over the debt and estate before that BR date. If the ORs can realise any funds from that BR estate at any time (now or in the future) then that will go towards repaying the BR debts. So for EG; lets look at bank charges; the insolvency service, we are sure, are lookign closely at the outcome of the court actions and may well try to reclaim the charges from accounts within the BRs estate at some point in the future).

After you are BR, you start a new life, a new "estate" and this does not cross with your old one; unless something happens such as a death that you will become a beneficiary in or you win the lottery or you have a property they may want the equity from. After your discharge, your new estate becomes yours in it entirity (barring the few odd bits above).

grassit

Ok, so its a gamble the company will take to get monies back. Fair enough, I get that. However, would it not be more effective all round if there was a pre-bankruptcy stage where it is established if the person can pay. If they can, bankrupcy ensues. But if there is nothing, then why make the person bankrupt?

If its only to teach that person a lesson, then it seems an enormous price (no pun intended) to pay when potentially third parties may be picking up legal fees, etc along the way.

I have never been in this position so I am only commenting from the wings.

tigerfeet2006

Sky, I think Grassit is in Scotland so it is the Scottish Sequestration we are talking about. So they are wating for a company to do the deed.

skylight

Mmm. Its also a business thing. Sometimes assets need to be written off and of course there is the tax deductible thing.

I think (I could be wrong) that for HMRC particularly, HMRC are not permitted in law to just over-write a debt. It needs to be legally written off, old files closed so new ones can begin. Hence why they will make so many people BR.

philnicandamy

Thing with HMRC now though they seem to be a little better than they were....rather than jump straight away & make someone BR they're looking at cases & in some cases offering payment plans to sort the debts owed

but as usual sky you are correct....or at least thats my way of thinking as well

grassit

Yes, I am Scotland, but this was a general question.

I feel for people going thru the wringer when a sensible, pre bankrupt stage could save a lot of stress and upset. Of course, if I was the small business waiting to be paid £££s, I'd probably have a different view!

debtinfo

Of course the assets/Liabilities is only half of what the OR does. The other half is to investigate the dealings of the bankrupt. There are some bankrupts (albeit only a small proportion of the total) where the public and future customers need protecting and so restrictions are applied. For instance someone who sets up ltd companies, taking peoples money with no intention on delivering on goods/services