Tipping over into Bankruptcy.. Key to do's

Phoenix88

Hi,

I am at the point where I have decided to make my self bankrupt.

I have read the really useful stiky's and noted a lot of useful info.. thanks to all for this.

My situation is that I currently am a director of my own 'self employed' limited company.

I also have a vehicle registered in the Ltd Co. which is worth £6,500 odd and is 8 yrs old, used exclusively by me and 'my' primary asset.

My questions are:

1. How is Directorship disqualification occur and what structure do self employed people then take? 1/3rd of my current income is Travel to work in London. I am a lecturer with a small academy? Currently these costs are deductable from that earned for getting to work, can this element be reatined as a Sole Proprietor? what advice on later tax efficiency as structure can be given, once Ltd company options no longer exist.
2. Given the vehicle is not 'mine' but the entity, am I correct that it gets to survive, the £1000 rule downgrade, and that I will effectively be able to retain its use as a company vehicle given that it belongs to the entity not me.
3. Apart from approaching the Co-op before BR application is there any other clever/sensible must do items before BR application that will make the journey more liveable.
4. I have a ltd company bank acc and a personal bank acc with a bank not supporting Bankrupts but neither have overdrafts or are going to be effected by my BR application is it possible the facilities maybe retained? HSBC is the bank

Really grateful for this forum and to any who choose to share, in what is invariably a humbling time, strength and courage to all facing similar, all responses appreciated and even more broad and general comments on practical matters welcomed.

Thank you.
Phoenix88

Flyright

From what you are saying, the company will have to cease trading if you declare bankruptcy. You cannot be a director of the company nor can you be involved in any way in its management and since the company is 'you', you will not be able to take any part in it.

Phoenix88

So the Assets controlled by me yet owned by the Ltd entity, how would this be handled... should I add a new director.. who is 'friend' so ltd Company may still have a valid director and I continue to use the car as an employee?

GazHatesBanks

Hi Phoenix,

Simply adding a director would still leave you in control (or partial control) of a company and isn't an option under BR.

Also, simply transferring your shares to someone else could be seen as disposing of an asset at below true value (which could result in a BRO/BRU).

There are ways round it but the gains may be negligable.

I was advised that I could:

1. Issue additional shares in the company (depending on your shareholding, you may need to authorise additional share capital first);
2. A trusted friend can then purchase these shares at an agreed rate (par value) - this reduces the value of your personal shares but without disposing of any thus you can't be accused of transferring an asset at under value (your shareholding).
   1. As you are now a minority shareholder, your stake in the company is reduced proportionately (e.g. if the net asset value of the company is currently £6k and you own 100% of the shares, then your shares are valued at £6k.If you issue sufficient shares so that your share is now (say) 10%, your shares will be valued at £6k x 10% = £600.
   2. Technically this is still an asset that you own, but in reality it would be nigh on impossible to sell and probably not worth the ORs time to do so.
3. The additional shares can be of a different class if necessary (so that no dividends are payable and can be redeemable at some future date which would be post auto discharge) which would still allow you to receive the dividend from the company from your current shares.
4. You will still have to resign as a director once BR and notify Companies House.
5. The company would need to employ you on a PAYE basis and you would be liable to tax and NI deductions (and the company liable to pay employer NI) providing your earnings are high enough.
6. Your friend would also need to take responsibility for the managing of the company
7. Once discharged, the company can then re-purchase the shares back from your friend, returning you back to full control and as a director.

You would need your accountant to ensure that all the forms are correctly completed and filed prior to declaring BR and you would need to check the situation with the company's bankers - you may not be able to retain full control of the bank accounts.


Note that the accountant I used was not an insolvency expert although he was confidant that this would not cause a problem (although the OR probably wouldn't like it, it's unlikely that they could do anything about it).


Personally the additional costs (accountant, PAYE, NI, etc.) and the sheer potential hassle factor outweighed any possible savings (although I intend to resume as a self employed contractor via a ltd company once discharged). You also need a friend (or partner) who you trust totally to do this.

On the positive side, if you close the company and become self employed - even though you will have to change vehicles, all the running costs will still reduce your self employed profits - your accountant should be able to advise you on the most tax efficient way of doing this.

Please take professional advice before doing anything in regards to the ltd company though - preferably from an insolvency expert who has had dealings in ltd companies before.

Hope this helps.

Gaz

Phoenix88

Hi,

Thank you for the response. Very insightful and greatly appreciated.

How many years before a BR could attain mortgage finance and buy a home again even with a sizeable deposit?

Just the 6 years? or lingering longer assuming no special cases..

Phoenix88

NeverAgain_2

One or two people have posted on here to say they've obtained a mortgage within the six years, but it's probably safest to assume you won't be able to get one before the six years is up.

Getting a mortgage straight after the six years is difficult, but more people seem to manage it.

OutofDebt-NOT-OutofDanger

Some have managed it within the 6 years but even after this the interest rate will probably be high and I suspect you will need a BIG deposit.

You would probably need to find a specialist broker when you are ready.

Phoenix88

Very useful feedback from all greatly appreciated..

Should I be opening Barclays/Co-op accounts in advance of 'events' or deal with it as and when?

Anyone have a view on how my existing without 'debt' and effect bank accounts may respond..HSBC.. no overdrafts or overdrawns..
I assume the company one will have to be closed.. but the personal one.. which has no facilities for debt and arrears, and has been properly conducted largely?

Finally it would be great to meet any one London/Sussex way who has/is surviving the process ;-) for offline experience share. I am Bolney, between Gatwicj & Brighton and into London 3 times a week Tower Bridge way. Coffee's/drinks on me, whilst I still can.

GazHatesBanks

Hi,

For your personal account you can open a Co-op cashminder at any point. When you fill the forms in and speak to the OR just let them know that this is your normal account - when you are BR you can phone the co-op so they don't freeze it. I'm sure that HSBC will be very quick to freeze your accounts.

If you're closing the ltd company then yes you'll need to close the accounts.

If you're keeping the company open, could you change the signatory over to the new director? Otherwise they will have to open a new account.

davidgmmafan

I would personally open a the Co-op account first. Just be sure to tell them during the application why you want it, same as you would if applying afterwards, as you don't want to be going through a credit check you will probably fail for some higher spec account.

I personally found it better to do it after the bulk of my payments for essentials had gone out. I don't recall my bank account being frozen, but it would be a bit of a pain if council tax or something didn't get paid because of that.

Maybe try to get used to dealing in cash for shopping etc, the co-op has a debit card but for me this tends to mean I spend less as I hate parting with notes.

Can't help with the company stuff I'm afraid.