Bankruptcy versus IVA

xjr264

Hello everyone,

I'm new to these boards although I have been reading them for some time, some of the advice is excellent. To cut to the chase, my finances are in very poor shape and I am considering going bankrupt so I can start again.

To give a bit of background, I'm an IT Contractor working through my own Ltd Company and both the company and I now owe significant sums of money:

The company owes VAT, Corporation Tax and PAYE/NI to HM Revenue and Customs to the tune of some £30K

I owe personal unsecured debt of £57K plus self assessment of £5K to HMRC.

I have recently secured a new contract but in the current financial climate rates have slumped by some 40 to 50% leaving me unable to meet the commitments of the business or my personal finances. Additionally my wife has asked me to leave the house so I am trying to move into rented accommodation. The most pressing questions I have are:

1. 18 months ago my wife remortgaged the house into her name to cover off a 2nd charge against the house which resulted from previous financial problems on my part (tbh I have never really recovered from them). For the last 18 months I have paid her money as a sort of rent and also to cover household bills and food shopping. With this in mind, is it likely the OR will ask for a share of the equity as on paper I have no interest in the home?

2. In terms of an IVA, is it possible for the Ltd company HMRC debts to be added to the IVA, if this is possible, would this be a better route?

3. My wife has her own Ltd company as she is shortly to go contracting herself and has agreed to let me work through it if I go bankrupt. We've agreed that I won't be a shareholder and won't be taking dividends but only a salary of about 15K. If I go bankrupt, this arrangement will continue until I can seek an alternative arrangement, is the OR likely to object, bearing in mind the contract will be between the Ltd company and the agency, I am merely an employee?

4. The household contents were largely bought together however at the point I go BR (if I do) I will be living in a rented flat with a few sticks of furniture etc, which I understand probably don't have to be listed as assets. Will the OR have any interest in my wife's household contents? Basically I'm just moving out with the clothes and a laptop!

Any help or advice you can give would be greatly appreciated; I still love my partner and want to minimize any effect this unfortunate situation will have on her, even though ultimately we will probably end up separating.

Don't expect any sympathy here, I know I'm the architect of my own downfall, like a lot of people I think I'd lived a bit too well and hadn't adequately prepared for the downturn.

Many thanks

debtinfo

1. the transaction will be looked at as i am sure you would expect. if the transfer was purely to cover the second charge that was against you there wll be no problem. (you will need proof). if for instance the charge was £10,000 and there was equity at the time of £50,000 then there would be a problem but if charge was £10,000 and equity was £10,000 or less the there would be no problem.

2. The Limited company debts are limited to the company unless the Liquidator decides that you have unfairly paid yourself money in preference to HMRC. The liquidator could apply for the monies back from you.

3. you can work for whoever you want. The only thing to remember is that as well as not being a director on paper you must not do any of the jobs of the director.

4.The OR will have no claim on her household goods.

xjr264

Debtinfo,

Many thanks for your reply, the 2nd charge was joint although I pressurized my wife into it and it was used to pay off debts that were solely in my name. Equity in the home at that time would have been around 70k, the 2nd charge was for 50K, I guess my share of the equity would have been 35K which I means I got 15K more than I should of when she settled the 2nd charge. If the OR doesn't see it that way, I guess it would been I got 25K (i.e. my half of the 2nd charge) and I'm owed 10K, does that sound right??

Also does signing the equity transfer form over to her when she arranged the remortage carry any weight?

I currently own a car and a bike, both have oustanding finance, before BR I intend to sell the car, settle the finance and use some of the money to furnish my flat as I currently have no money! Would the OR take a dim view of this? BTW, I won't be buying designer sofa's just what I need from Ikea!! Additionally my wife has agreed to buy the bike via her business so I can use it as company transport, as I don't intend to get another car, will they have any objections to this?

One final question, I'm a bit worried that having done research on the net, it would indicate that your landlord is informed by the OR when you go BR, is this correct?

Many thanks for your help

Charco_2

This is a rather complicated story and while the people on here are great, i think it would be advisable for you to speak to a professional.

All i can say is that I'm truly sorry this situation has led to a break-up in your family - temporary or otherwise!

Charco_2

If the company is trading while insolvent then you have to seek urgent financial help! If it continues to trade and the situation gets worse, this could effect your ability to hold a directorship in the future.

1. Depending on the value of the property and the equity available at the time, there is a potential transaction at undervalue (TAU) which could be overturned in bankruptcy. However since your partner paid off a charge specifically relating to you this would be reflected in any calculation of a TAU.

2. The limited company is a totally separate entity and you have no liability to it's debts unless personally guaranteed. If you opened a new limited company, it is possible that the VAT unit of HMRC would look for security before allowing you to charge VAT.

3. This idea would seem to be debt avoidance and may raise questions (such as are you operating as a shadow director while bankrupt/insolvent?) however it's possible you would get away with it but bear in mind, your wife will own the company and all the profits and dividends... is this wise if you are separating? (entirely for you to decide)

4. Your domestic effects are exempt in bankruptcy within reason. Provided they are not antiques, home cinema systems or valuable paintings, items in the home will not be affected.

I see you've started to answer some of these questions, in your other post.

The OR would have no interest in the marital home provided you can back up the figures you have given in your second post. The OR may enquire whether your wife can afford to run the property without your financial input but that seems to be the case anyway so probably wont be an issue.

The car and bike are of no consequence. If you sell the car to furnish the house the OR isn't going to be too concerned. I would bear in mind that if there is anything adverse registered against you it may cause a problem for you to find suitable accommodation without you putting down a considerable deposit. Utility companies may also look for security... The bankruptcy itself should come to £510... is the sale of your car going to cover all this?

Speak to a professional