Help Please: Facing bankruptcy & company insolvency

jb321_2

Hello, I've been advised to repost this here.

Hello everyone,

I've just joined this forum as my wife and I are in what seems a desperate situation. Our business has declined and we've had to keep it going with bank loans our own savings and personal credit cards. We've spoken to 6 'advisors' and had 6 different pieces of advice that has just confused us totally. Please, can anyone help us? - Here goes:

We are a company directors (husband & wife), our company owes the following:

HMRC: £7K
VAT: £4K
Company credit card: £5K
Trade creditors: £9K
EFG Bank Loan: £35K (joint personal guarantee)
Bank overdraft: £15K (joint personal guarantee)

Total company debt: £75K

There is also an overdrawn director's loan of £65K which we are both liable for, as legally we owe this to the company. Our accountant has always advised us to take out salary as dividends.

I (not my wife) personally owe the following:

Bank Loan: £15K
Credit cards: £40K

The company has no assets and we only have £40K equity in our house. When we speak to an insolvency practioner they seem to want to guide us down the IVA route, however when the company goes we will not have any regular income.

Every avenue we explore seems to come to dead end. We just want to keep our house and start all over again debt free.

My wife wants to continue in business as a soletrader, while I try and get a job.

An IVA doesn't seem right, as to us it seems just as restrictive as bankruptcy and lasts longer!

Bankruptcy? Can I go bankrupt on my own and leave my wife free to set up her business - is her credit rating affected?

Any Ideas? Please help, we'd really appreciate it.

Thank you in advance.

JB

steve_luton

Hi JB,

Going through a similar situation (Company folded November, declared BR December) so here goes......

What some IPs don't tell you is that if you enter an IVA and have equity in your property you can be forced to release some/all of this at the end of 5 years for your creditors (how they expect you to fund it is another matter!).

That was the main reason I chose BR - I simply couldn't see the point in struggling to pay bills and something towards the debts for 5 years and STILL potentially lose the house. After all if I had sufficient equity I would simply have sold up, paid everything off, retained a reasonable credit rating and saved up a deposit for another house in a few years time!

I was also in a position where my income wasn't steady and an IVA doesn't really cater for that - they fix a payment plan and you stick to it. If you aren't able to you could still end up BR! At least under BR you pay anything over and above what you are judged to need for day to day living (which while not generous is normally sufficient).

You could go BR and leave your wife free to set up her own business but some of the debts will pass to her from the business as a joint director/loan guarantor namely:
£15k overdraft
£32.5k director loan (assuming 50/50 split but your accountant should know this)
Potentially HMRC debt (directors can be personally liable for this debt - check with your accountant if this applies to you).

The bank may also require payment of the EFG - it depends on who you bank with but the banks must try to recover the money from the directors before approaching the Government scheme, but some try harder than others it seems!

There are ways of keeping the house, but you would have to find someone (family or friend) to buy the equity (or if you go BR on your own half the equity) and of course you would still need to keep up the mortgage repayments.

If you do decide on BR (either you alone or jointly) then I recommend the website piggybankrupt - loads of useful tips on how to prepare for it and what to expect.

Hope this helps you.

Anondebtadvisor

If you decided upon BR your property would be valued 2yrs and 3 months after the Bankruptcy so at this time you may find there is more than £40k equity for you to release for the BR estate. If you cannot come to an arrangement with the OR regarding your share of the equity they can get an order or sale or place a charge over the property.

If you only go BR you wife will still be liable to the Joint PG's - as the BR will only deal with your liabilty and not hers. You need to consider how she will deal with her liability?

Your wife can trade as a sole trader even if bankrupt - but she cannot be a company director.

If you dont want to do an IVA seems BR is your only option?

Anondebtadvisor

You could go BR and leave your wife free to set up her own business but some of the debts will pass to her from the business as a joint director/loan guarantor namely:
£15k overdraft
£32.5k director loan (assuming 50/50 split but your accountant should know this)
Potentially HMRC debt (directors can be personally liable for this debt - check with your accountant if this applies to you).

In Insolvency this is not the way joint debts are dealt with. They will both be responsible for 100% of the debt, so if Mr goes BR they will persue Mrs for the entire amount.

Upsidedown77

My Dh and I went BR in 2010 both company directors of our company like you we had accured personnel dept through trying to keep company going plus many company depts like yourselfs. Our accountant brought a IP into see us and they both said that the best way forward for us was BR.
Forward 2 years we are now discharged and my DH is a sole trader and things have never been better, the BR year was tough and for me I felt a great deal of shame but immense relief too.My Dh had a very low paying job but it enabled him to study and basically get himself back up to speed in his trade, I got a p/t job which put the food on the table.Relatives managed to scrape the money together to buy back the BI in our house, we lost the car but last year my FIL helped us buy one. And now things are really picking up DH last Sept was offered a brilliant job (after passing exams) and I have given up work for the first time in 30 years!!! No more working from 5am to 11pm....
It can be done but it is not easy and very stressful but with grit and determination anything is possible.
By the way like other posters have mentioned we were told that if only my DH went BR then I would be liable for 1/2 the debts still so basically would be no better off. HTH

Anondebtadvisor

Great news it just goes to show that bankruptcy can be the best option x

All the best for the future

NeverAgain_2

Not sure what you mean by 'overdrawn directors' loan of £65K', but it looks like the pair of you owe about £200K, much of it jointly.

With next to no income, you have no ability to repay what you owe.

One way or another, your creditors will want the £40K equity in the house, so expecting to keep it is not realistic.

Seems to me your best bet is to both declare yourselves bankrupt.

The sooner you do that, the sooner you can make a fresh debt-free start, albeit in a rented house.

jb321_2

Thanks for your responses. I've since spoken with the business debtline twice, the first chap was like a robot and just not interested, then the second chap was really helpful.

One option we discussed, was getting the bank to renegotiate the company loan and overdraft and putting a charge on our house. We would then have no equity in the house and so no assets. Assuming that we could keep up repayments our house would be safe. As the personal debt is all mine I would go bankrupt and then look for another job. As to whether this is at all feasible I don't know.

Anondebtadvisor

You need to be careful if you are thinking of giving them a voluntary charge because this could be seen a preferring creditors and the OR could overturn it and you could end up with a bankruptcy restriction order/undertaking.