Self Employed Sole Trader possibly going bankrupt...

Musicjazz

Hello Everyone.

Let me start by saying what a wondeful site this is indeed!... :beer:
I have recently realised my debt has become a major problem, and after a bit of searching online for advice, came across this website. I have been reading the posts for over a week now, and have finally plucked up the courage to post a thread to ask some advice.... Please bear with me, as I am a complete newbie at this...

My situation is this... I am a self employed sole trader, and after living a perfectly "normal" life for the last few years, have finally realised my personal debt has spiralled out of control. I realised this about 2 months ago, when the 0% offers on my credit cards started running out. As of this month, I will for the first time miss payments on all of my credit cards as I simply can not afford to pay them.:(

I have contacted the CAB last week, and have as of today filled out their initial contact form and SOA and sent it back to them. The very kind lady I spoke to initially said I should expect hopefully for an interview within the next 3 weeks (I guess they are very busy... sign of the times?)

After going through my situation with the kind and very sympathetic lady on the phone last week, she seemed to suggest, that the most likely outcome of my situation would be bankrupcy (or "sequestration" as its known up here in scotland). A very scary word, that I had never thought I'd never hear applied to my own financial situation.

As you can imagine, after many sleepless nights, stress and worry, I thought I'd ask on this wondeful website for some advice or answers that I have rolling around in my head.

Any advice is greatly appreciated...

Here goes:

1. I am a self employed/sole trader. How does bankrupcy/sequestration differ from that of an employed person? I presume I am still allowed to keep my business, as its my only source of income...

2. The SOA I did for CAB, I also included my business expenses as well as my personal expenses in the expenses column. Is this correct? I presumed so, as I am the one who pays for it all out of my own pocket.

3. If this is the case, I found out that the balance after income and expenses was that of only a few pence left... I presume from this that if I do become bankcrupt, I wont be able to make any payments to creditors? (like I would in a trust deed?)

4. Is there anyway that a bankrupcy can be rejected by creditors?

5. My income fluctuates from week to week, how on earth do they calculate your income for repayments? (I just used my previous tax return net income for the year, and divided it by 12 to get my monthly income)

6. Finally. This is the first month I will miss minimum payments on my credit cards. So although my credit rating wont be very good (due to amount of debt), I have never actually defaulted before. I am wondering when it comes to card payment time at the end of the month.. Do I contact them about it? or do I just begin to miss payments if I'm most likely to go into bankrucpy in the next month or so?

I'm sure there are a thousand other questions I'd like to ask, but I feel I may have made this post too long already!

My income is around £16000 a year (based on previous tax return), and my debt total is about the same. Mainly credit cards. I realise now after doing my SOA, that I have been living beyond my means for the last 3 or so years. Putting car insurance etc. onto credit cards thinking I can pay it off later... of course that "later" never came...

I have to admit, I feel very foolish to have got into this situation, but realise now, I need help.

Any advice greatly appreciated.... Many thanks.

Musicjazz

I have completed my SOA on the advised site. Please find it below...

I was originally thinking about getting a consolidation loan to sort it all out, but because of a drop in income (business has become slower) since January, I believe my only real way out of this is now bankrupcy/sequestration?...


Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household.........
Number of cars owned....................
Monthly Income Details
Monthly income after tax................ 1169
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1169
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 235
Management charge (leasehold property).. 0
Council tax............................. 55.84
Electricity............................. 22.5
Gas..................................... 40
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 20
Mobile phone............................ 20
TV Licence.............................. 7.5
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 216.67
Clothing................................ 8
Petrol/diesel........................... 151.67
Road tax................................ 17.92
Car Insurance........................... 55.83
Car maintenance (including MOT)......... 29.58
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 7.5
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 7
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 20
(Unnamed monthly expense)............... 0
S/E Business Stationary................. 80
S/E Business Insurance/Pub Liability.... 30
S/E Business Website/Advertising........ 30
S/E Business Bank Charges............... 20
Self Employed Business Rent/Elec/N.I.... 130
Total monthly expenses.................. 1205.01

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1000
Other assets............................ 0
Total Assets............................ 1000

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
RBS Gold credit card...........2410.53...54........20
RBS Platinum...................1744.4....16........20
Barclaycard....................6944.83...158.......20
HMRC tax arrears...............1000.69...375.......0
Very store account.............718.19....0.........0
RBS overdraft..................150.......2.........0
Virgin credit card.............2901.89...102.......20
Natwest credit card............1616.86...38........20
Total unsecured debts..........17487.39..745.......-

Monthly Budget Summary
Total monthly income.................... 1,169
Expenses (including HP & secured debts). 1,205.01
Available for debt repayments........... -36.01
Monthly UNsecured debt repayments....... 745
Amount short for making debt repayments. -781.01
Personal Balance Sheet Summary
Total assets (things you own)........... 1,000
Total HP & Secured debt................. -0
Total Unsecured debt.................... -17,487.39
Net Assets.............................. -16,487.39

Reproduced on Moneysavingexpert with permission, using IE browser.


I have again included my business outgoings on this SOA. I presume this would be acceptable to IP to be included?

Secondly, I live with my girlfriend. I haven't included her income on this, and we split all household bills in half. (She earns about the same as I do). The amount for household (rent/food etc.) is the exact half that I pay a month (i.e rent/food etc is double this for the both of us). I haven't included her in this, as I don't want her to have anything to do with my own personal debt problem. Will the IP accept this, or expect my partner to pay all bills while I pay creditors off?

Any advice very thankfully recieved...

Sleepless in Fife....:(

pure_dead_dopey

I would hold on here, have you explored a DAS?
You should not be paying unsecured debts, ie credit cards etc over HMRC and and your priority bills.
HMRC can make you bankrupt but the rest appear to be unsecured debt, which is that unsecured.
Personally I think sequestration a bit drastic here considering you've never missed a payment yet.

Musicjazz

Thank you for your advice pure dead...

I have sent CAB initial contact form and SOA in last week. So just have to sit and twiddle my thumbs before I get an interview (3-4 weeks)... I presume they'll suggest a DAS if they feel I can (somehow) pay it. Only reason I'm thinking sequestration more likely is after doing my SOA. It was a real eye opener. Made me realise that I cant afford to pay...

Only reason I've managed to pay cards etc. so far is because all big expenses (like car insurance etc) have been paid by credit card...(vicious cycle as it never gets paid off, and just increases minimum payments)..

This can continue no longer, as I am very near the limit on all cards...

On another note, do I have to include my partners income on SOA if I've halfed all household bills?

Will my BR affect my partner in any way?

Any help greatly appreciated...

pure_dead_dopey

I think as a first step you should open a bank account that has nothing to do with any of your creditors, co-op cashminder is the favourite with us with dodgy cedit files.

BUT I also think you should hold your horses with the sequestration, it's a huge step and if you don't need to don't there are other alternatives to debt.

If your partner is financially linked to you, then yes any debt will affect her credit file. You should stop paying the credit cards now and start paying your important priority debts, priority being that HMRC one, they will let you pay in installments but you need to be talking to them now, never mind waiting for CAB. CCCS have a Scottish branch so not a bad idea to talk to them, they also have an online debt remedy which you can fill in and it makes rough reccommendations. It would also help if you read other websites and their take on your position.

Musicjazz

Hi Dopey.

Thanks again for the advice.

I have already opened cashminder account, and am just awaiting the card etc coming through.

I have a payment plan in place with hmrc already. I've been paying £375 a month since February. Because of a drop in income, and the fact I need to save for car insurance/car tax due in June, and also a pot to pay bills over the summer months (my business always drops over summer due to holidays), I can no longer afford this.

Next payment is due on 28th of this month.

Credit cards I have decided I wont pay as of this month (21st may), as I simply cant.

Should I contact my credit card companies to make them aware I cant pay this month, or does it not make any difference?

The only way my girlfriend is Linked

Musicjazz

...got cut off

Meant to say, only way my girlfriend is "linked" to me is that we live together. No joint accounts etc. Will she be effected if I go BR?

Only reason I am considering sequestration (really dont want to) is that is what the money advice section of CAB suggested when I spoke to them on the phone. After a drop in business, and doing my SOA (see above), it appears to be the only realistic way out this terrible mess I've got myself into...

Thanks for all the advice...

katdes

I think you have to ask yourself, do I really want to go bankrupt? Is it just a case of realising how long it would take to clear these debts and you feel that you can't face that?

I think that if you negotiate with your credit cards (offering a small amount £10.00?) and try to keep up the payments to HMRC or at least keep paying something towards this, you could get through it - but it won't be easy.

I am sure I don't need to tell you Bankruptcy is a big step. As you need to consider if you keep trading - you might find problems getting supplies or credit as your business grows.

I hope you can work it out.:)

Barbeduk

Do you really need to go bankrupt? Think about it really carefully, the effect it will have on you personally and on your business.

Sorry to be a busybody but if the figures on SOA for living expenses are only 50% of total, your grocery bill is somewhere you can make a massive saving. The total for 2 adults could be cut to £200 giving you an extra £232 a month to play with. I only suggest that as I can feed 4 on £260, which I've cut back from £500.

I really hope it turns out ok for you, we also have a small business and the first quarter of this year was a nightmare!!

Musicjazz

katdes wrote: »

I think you have to ask yourself, do I really want to go bankrupt? Is it just a case of realising how long it would take to clear these debts and you feel that you can't face that?

I think that if you negotiate with your credit cards (offering a small amount £10.00?) and try to keep up the payments to HMRC or at least keep paying something towards this, you could get through it - but it won't be easy.

I am sure I don't need to tell you Bankruptcy is a big step. As you need to consider if you keep trading - you might find problems getting supplies or credit as your business grows.

I hope you can work it out.:)

Thanks katdes for the advice. I really dont want to go BR for obvious reasons. I initially thought I may be able to sort it out with a conolidation loan, but realise with my income at the moment, I wouldn't be able to pay this either (the bank wouldn't offer me one either). I then thought a trust deed would b:Ae the way to go, but after talking to CAB, they seemed to suggest that BR wwas my best option...
Thankfully, I dont need credit to run my business as its skill based. I've been trying my best to pay hmrc the £375 theyve asked, and have managed it for 4 months, but I've had to scrimp and save to do this. Often going without food for it... The problem I face now is the summer months are coming up, and this is notouriously bad for my business. I'm lucky if I make half the income I make the rest of year for around 6 weeks. What I've done in previous years is save a pot to help me get through (and pay all bills), but this year with paying the tax arrears, and minimum payments on cards, since january, I've barely had money for essentials, let alone save money for the summer and car insurance...

Musicjazz

Barbeduk wrote: »

Do you really need to go bankrupt? Think about it really carefully, the effect it will have on you personally and on your business.

Sorry to be a busybody but if the figures on SOA for living expenses are only 50% of total, your grocery bill is somewhere you can make a massive saving. The total for 2 adults could be cut to £200 giving you an extra £232 a month to play with. I only suggest that as I can feed 4 on £260, which I've cut back from £500.

I really hope it turns out ok for you, we also have a small business and the first quarter of this year was a nightmare!!

Thanks for the input barbeduk.

I realise I made a mistake with SOA, and that the groceries figure is the total we both pay... So £100 odd is what I personally pay.

I will certainly look into cutting