Could this be the answer to my prayers?

billyboing

Hello

I'm new in these forums but hoping for any advice, please.

Last year my business failed because of the Economic climate.

I'm now trying to set-up an IVA but it doesn't seem to be looking promising right now, I'm self employed and my earnings are up/down all the time!

I have £20,000 - £30,000 equity in my house, obviously losing my house is not something I want to even contemplate.

My biggest creditor is a family member who helped me out financially, last year. The family member isn't pursuing their money back as they understand the situation I am in.

I am now thinking this person may be my last only hope if I HAVE to go down the BR route. Could the family member attempt to get a charging order on my house that could inevitably protect the house, their interest plus in turn 'reserves' the available equity in a BR? The amount exceeds the equity and the fact that they helped me out financially can legally, be proved via bank statements etc.
From what I have read an OR isn't interested in selling the house when there is little or no equity?

We have no written agreement between us, however I'm sure this would not be impossible.

Hoping for any thoughts on this.

IF

Hi Billy and Welcome, I would contact Business Debt line for further advice too.

Business Debt Line - Click here

Best wishes
If...x

debtinfo

Think about it carefully, you are going to reserve all of your available asset to make sure only one of your creditors is paid, That creditor is a family member that you want to prefer over all the other creditors and you want to use bankruptcy to make sure all the other creditors dont get anything. Furthermore you are going to ensure that all the people who work on your case and process the bankruptcy for you also dont get paid.

I have a feeling that the OR is not going to be happy about that, What do you think?

silvercar

Interesting one. Although I can see debtinfo's point, it would be your creditor who put the charging order on the property before bankruptcy rather than the bankrupt doing it.

The risk, if the OR suspected foul play, would be that the bankrupt gets a BRO/ BRU for many years. I don't know that the OR could pursue the creditor given that a court of law placed the charging order on the property.

I do know of someone who put a charging order on a property as they were owed a large sum of money and after a falling out repayments weren't forthcoming. The charging order went on when the house went up for sale and the creditor got worried that the debtor would sail off into the sunset. The property owner then went bankrupt six months later, by which time the creditor had been paid from the house sale proceeds.

debtinfo

In the OP's case the OR would definitly try to have it overturned and the money returned, firstly as a technical peference and secondly if the OP consents to it as a BRO matter. I have seen many cases like this

property.advert

The reason creditors go through the process to get a charge over an asset is to make sure they are paid.

Say you owe 10 credit cards £10 each and one of them get a charging order. Do you really think the OR is going to strike that out because it gives that creditor a preference or would the retort be that all the creditors had the chance to obtain a charging order but they could not be bothered.

In fact, take it back further. Let's have the OR overturn the mortgage lender's first charge on the house because that puts them in a favourable position.

I don't think it would take much to sort out a charge over the property and this could well have been in the original agreement between the OP and his largest creditor. A contract does not have to be written down to be legal.

debtinfo

That is totally illogical. The bankruptcy laws allow for a preference to be overturned in certain circumstances, it extends those provisions specifically in the case of family members. It is clear in law that they are to be treated differently than other creditors. It also only applies to people who are already insolvent and not to people where the person asking for the charge provides at the point of the charge the asset as well, as in the case of the mortgage providor. It may be the case that certain lenders would fall into the defininition of a preference if the charge was taken within 6 months of the bankruptcy order but they are generally ignored when there are only other commercial lenders as they are all involved in thousands of bankruptcy cases and so they even them selves out over the long run.

If you wish to look at the law i have reproduced it below

(3)For the purposes of this and the next two sections, an individual gives a preference to a person if—
(a)that person is one of the individual’s creditors or a surety or guarantor for any of his debts or other liabilities, and
(b)the individual does anything or suffers anything to be done which (in either case) has the effect of putting that person into a position which, in the event of the individual’s bankruptcy, will be better than the position he would have been in if that thing had not been done. IE. giving the charge will put them in a better position
(4)The court shall not make an order under this section in respect of a preference given to any person unless the individual who gave the preference was influenced in deciding to give it by a desire to produce in relation to that person the effect mentioned in subsection (3)(b) above.
(5)An individual who has given a preference to a person who, at the time the preference was given, was an associate of his (otherwise than by reason only of being his employee) is presumed, unless the contrary is shown, to have been influenced in deciding to give it by such a desire as is mentioned in subsection (4). IE with a family member it is presumed that you wanted to put them in a better position
(6)The fact that something has been done in pursuance of the order of a court does not, without more, prevent the doing or suffering of that thing from constituting the giving of a preference. IE just because it is a court order does not mean that it is not a preference

silvercar

Very difficult to distinguish the genuine from the fraudulent. ie a family member lends someone money for a business. Only when it becomes apparent that the money may not be returned/ the business is failing etc does the family member realise it is best to safeguard their lending and go for a charging order, before that time everything was verbal. So its when the !!!!!! hits the fan that a court order is obtained not at the time of the loan, because at the time of the loan there was perfect trust that the loan would be repaid.

Timing is everything, get a charging order when someone is solvent and it looks a business transaction, get one when there is a sniff of failure and its protecting an investment, get one at the point of insolvency and it looks suspicious, but to an associate that is the exact time when a previous verbal agreement needs to be enforced.

debtinfo

but the key thing is this. If they were just attemting to prove the debt so that it could be counted equally with all other debts that would be fine, but if they are trying to put family ahead of all the other creditor, that is where the misconduct occours

silvercar

debtinfo wrote: »

but the key thing is this. If they were just attemting to prove the debt so that it could be counted equally with all other debts that would be fine, but if they are trying to put family ahead of all the other creditor, that is where the misconduct occours

Yes but also I'm sure there are cases where debts from family members are "created" in order to retain some funds/ equity.

At the end of the day it is all down to what the OR believes the true picture is and the motives for actions. The risk is that the bankrupt ends up with a looonngg BRU/ BRO and criminal proceedings for fraud. If you can convince the OR that all actions were genuine then there is the possibility of protecting assets.

billyboing

Thanks for all your help on this.

I just want to add that I'm certainly no fraudster and there has been no foul play. Neither of us envisaged that I would end up in this situation, the family member has documented every last single penny, has the bank statements in black and white.

In reality I guess the charging order should have been made many months ago!

Thanks again, I appreciate it