Help / advice needed please

soletraderonthe_edge

I’m starting on the IVA board as I’m not sure where to go with this. If theres a better place please let me know
I hope someone can give me some advice. Hopefully non judgemental as it took a lot to finally face up to this. I know I’ve got myself into this situation and need to get myself out of it.
Quick background.
I run a small company on a sole trader basis and have been struggling a little for about 3 years. Although the debt has been mounting it has been being serviced. I’ve always been confident in trading through this patch but at the moment it seems like things are coming to a crossreads and I need a bit of friendly advice
I’ve recently had one customer go bankrupt on me owing a substantial amount and two of my other largest clients are Government departments whose business has almost stopped in the last two months and I can’t see this improving in the foreseeable future – thank you past and current governments!!! We book and pay for services for the customers and then bill them to pay us back. Nobody is really late with payments but the credit cards wont wait a week if a cheque doesn’t arrive in time and I think this has caused the problem over the years
I have always kept my personal finances separate from my business so here’s the situation both personal and business accounts

Personal
HSBC visa £4700 no defaults or arrears and always pay more than minimum
Barclaycard £2300 as above
Beneficial Fin £3000 as above
Amex Gold & Blue NO BALANCES
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Business – but on personal credit cards cards
MBNA visa £24000 No defaults or arrears and pay of approx £8K per month but also spend same to run business
Coop Visa £12000 as above – payments and spending each month
Over the last 10 years I think I’ve paid about £30K interest to these two!!!
HSBC Business loan Was £50K now down to £32K – secured on property – about 7 years left
Business overdraft £20000 – never been over limit but never in black
Family Loan approx £15K
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
I own half the house with approx value of £130K and outstanding mortgage of £67K and basically nothing else. We have two kids at home one a teenager at school and on under 10

I know NOTHING about Debt solutions but I need to learn fast!!
I think the business would still be viable if I could get rid of the non secured debt and run the (downsized) business differently. I also think there would be enough profit
Can anyone help me put things in some sort of order?
Please ask any questions as I’ve hardly slept this weekend so may have missed things out
Last point my wife is fully awre of where we are and very supportive. I’ve not been able to get new personal credit for for about 5 years due to the credit cards so a bed credit file maybe wouldn’t have too much affect on us. My wife is able to get whatever credit we require as a family.

soletraderonthe_edge

Sorry forgot to mention.
Tax and Vat etc all upto date with no arrears

Charco_2

There is no difference between the personal side of your debt and the business side. It's all your debt.

According to your post, you have £8,000 "personal" (plus two Amex cards???) and about £51,000 on the "business side"... I assume the £32k secured against your property is now part of your mortgage on your home (if you can clarify)... does that mean you have an outstanding mortgage of £99,000 or was that already included or is there another property (business property?)

Don't panic just because you now know nothing about debt solutions... we'll get you there! Take your time to get to know everything and don't be afraid to ask a question - the only stupid question is the one you wished you'd asked but didn't!

If it takes a few days to understand everything then so what? you're debts aren;t suddenly going to double or treble in that time! There is no right and wrong, just what you feel is best! As long as you know what to expect, then that's the best that you can do!

One last thing... you mention that you haven't been able to get credit but your wife has... does this mean that HER NAME is on some of these debts?

Doesn't matter who spent it, just who does the bank send their bills to!

(was going to mention the tax and VAT etc... these debts - even if they don't exist now, will exist in April and some will have to be included in your debt solution depending on which debt solution you go for. Paradoxically this is sort of good news!)

soletraderonthe_edge

Hi Charco
Thanks for your reply

The Business loan is independent to the mortgage but the property is signed as security. I think to word is second charge??

NO debts mentioned in my original are in my wife name. The only time she is named in my debts is as cosigner on the business loan second charge. Whenm i say she gets the credit I meant she buys Settees / tv's etc for the house on interest free deals.

There is no business prtoperty as I work from home

I do have two Amex cards without balances as well as an Amex Business Gold Card and a MBNA Business card with no balance
My main concern (as I suppose is everyones) is my house. When we signed the second charge I had just got a new big client and everything was looking rosy, Then literally about 6 months later they merged with another company and I lost it. Looking back I really don't think we ever recovered from that.

Charco_2

These things happen... in fact that is practically what an IVA was invented for! (that's not to say it's your best or only solution, you should find out more)

So if your wife is "JOINT" on the business loan, then even if you enter into a debt solution, your creditors will be able to pursue her for that debt!

Your outstanding mortgage on the house then is £99,000 - because if you sold your home, BOTH the secured debts would need to be dealt with before you could take your share!

If you entered an IVA, you would have to address your share of the equity in your home - based on your figures above that would currently be about £5-10k (but that could/would change over the next five years obviously with house price fluctuations and you paying money off your mortgage)...

debtinfo

Hi, the first thing to do is to work out if without the unsecured debt repayments your business is profitable, look at your worst months not your best as an IVA is a long term commitment. Work out what your likely profit would be and if this covers your household and personal bills, what you have left after that is what you have available to fight your debts with, then you can start looking at what you can do with this money and what solution is best.

Finally, now that you are looking at debt solutions you are basically acknowledging that you are insolvent and so you must not use any more credit even the the credit that has implicitly already been granted such as zero balance cards. If the worst happens and you go bankrupt at some point how you have used your credit will be examined closely

Hope that helps

Charco_2

An interesting point to note - something i had missed yesterday but was brought up when discussing this with a colleague today: the principle of "Marshalling"

I said yesterday that you would have a limited amount of equity in your property but this is not necessarily true. You would arguably legally have no claim on equity in the property - good news for you when considering your debt solutions.

Marshalling is the principle whereby you have already taken out your share of the equity in your property for yourself (in this case to prop up your business) and so the next £32K of equity actually belongs to your wife as the joint owner. Anything over and above that would then be split 50/50

So if your house sold for £130,000 then £67,000 would go towards the mortgage, the rest would be split evenly between you and the wife.
Your half of the split would have to go towards paying your secured loan against the property, and your wife would retain her half!

(Luckily this currently means you personally have no equity for anyone to pursue making an IVA a much more attractive proposal for your creditors)