Bankruptcy help please

SimoneT

Hi there, I need some help with a query. Friends of ours borough two lots of money from us £700 without a formal agreement (through bank transfer) and £1650 with a formal loan agreement (through bank transfer). Our friends are now in the process of declaring themselves bankrupt. I don't know anything about the process and where that would leave us in respect of the money they owe us. Our friends are ademand that they will repay us the £1650 by the contractual date of 31/08/07 by selling one of their cars, through child benefit/tax credit backpays and then the monthly payments of those. I don't think they have thought this through properly, as it would not cover the whole amount. Anyway, question is, if they do declare themselves bankrupt, where do we stand? They have asked us to destroy the contract and declare that these monies were gifts, as they recon we would otherwise not be paid???? Any advise is greatly appreciated. (and yes I know you should never lend that kind of money to friends, boy what a learning curve this is!)

tomterm8

Don't destroy the agreement! Discuss it with your friend, and tell them to include any outstanding debts in the bankruptcy. They can still repay you latter informally, when they can afford it, but it would give you some say in the proceedings (as a creditor who is on their side) and mean that part of the money that will be taken by the OR anyway will be paid to you.

SimoneT

How much realistically speaking could I expect to be paid back through the formal process? As I don't know anything about the process and what is involved I want to make sure I have my facts straight before we meet our friends, which is currently arranged for this Saturday.

gettingitsorted

Hi Simone,

ok the long and short of it is this.....

if your friends put you down as a creditor which by rights they should do ,then you will no longer be allowed to deal with them you will haft to deal with the Official reciever.


unfortunatly they will not legally be allowed to pay you after being declared bankrupt untill they have been discharged this is upto a year as its seen as favouring creditors .Any cars of value will be taken by the OR sold and the money made gets shared between the creditors,this also goes for any assets they may have of high value .


i think you need to speak to them and see if they know what they are doing as bankruptcy is not a walk in the park.

gettingitsorted

SimoneT wrote: »

How much realistically speaking could I expect to be paid back through the formal process? As I don't know anything about the process and what is involved I want to make sure I have my facts straight before we meet our friends, which is currently arranged for this Saturday.

Get in touch with https://www.insolvency.gov.uk and have a read through there site .

gettingitsorted

SimoneT wrote: »

How much realistically speaking could I expect to be paid back through the formal process? As I don't know anything about the process and what is involved I want to make sure I have my facts straight before we meet our friends, which is currently arranged for this Saturday.

Ok all that depends on whether your friends get an IPO .

SimoneT

Thanks gettingitsorted. That's not good news, as this means we would have to wait another year for our money, in which it is not earning any interest. I am unsure as to wether we should get our friends to pay us back privately without them declaring us a creditors as we really want to re-invest the money asap.

SimoneT

IPO? Sorry, as I said never had to deal with this sort of thing before

wherediditallgo

Hi,

To be perfectly honest, I think you stand to lose a lot if not all of the money either way.

As an unsecured creditor, you fall far down the pecking order in terms of getting your money back. You can kiss goodbye to the money that wasn't part of a written agreement, as the Official Receiver won't be interested in it in terms of sorting out any repayment for it. For instance, I could have conspired with my mum to lie & say I owed her £10k - if the OR decided to include that in my repayments, she could have got monthly repayments which I could then have been getting handed back to me by the back door, so informal agreements will have to be dealt with by other means. The money that was part of a formal agreement won't feature heavily in any payment order the Official Receiver may make, because you're a friend not someone like a licenced credit broker or a utility supplier. When the OR makes a payment order, the creditors get a percentage of whatever that order amount is taking into account their creditor status & the amount owed. You're a friend rather than say a mortgage company, so your percentage is likely to be very low. You may find that the OR doesn't even include you in the repayments, telling your friend to make their own arrangement to pay you out of whatever living expenses they get allowed.

They certainly won't be allowed to sell a car & give you the money. If they sell it shortly before they are bankrupt & give you the proceeds from the sale, the OR can make you give back the money & can also penalise them for giving it to you, even though it was repayment for a loan you gave them. It would be seen as trying to dispose of assets, as well as also making you a preferential creditor (only part of the debt is on paper). If they sell it after being declared BR, they will be expected to tell the OR about any change of circumstances, (which getting money from selling a car would be) within 21 days for the OR to decide what to do with the money. Selling the car & giving you the money puts you in the position of a preferential creditor, which is a definite no-no. The car is an asset & isn't theirs to sell without giving the OR first dibs on any cash realised from the sale. The same would apply if their lottery numbers came up or they inherited a house - they couldn't give you a penny without first informing the OR.

Definitely do not tear up the written agreement! That's your only hope of getting any money from your friend at all. Trying to get you to say the money was a gift makes it even less likely you'll get it back, as gifts can't be got back whether they're money or actual things like a ring or video camera. There are specific exclusions where gifts can be protected (for instance, the gift of property to a spouse under very particular circumstances), but I very much doubt that an unsecured personal loan from a friend would be one of them. Although most debts are written off in bankruptcy, if your friend has any conscience they'll put you on the Statement of Affairs as a creditor & give details of all the amounts you loaned them, then find a way to pay you back even if it's in small instalments out of whatever money they legally have after the hearing. They'll be BR for a year unless there are special circumstances in their case, so you'll have to wait at least that long before you see the money.

It's good that they've told you they're about to go BR. My doubts about whether you'll actually see any of that money aren't eased by the fact that if they wanted to sell one of the cars to repay you, they could surely have done that a while ago, rather than leaving it until now to do so when there's less chance than ever of you seeing the money. That, plus telling you to tear up the written agreement, isn't nice, but maybe they just aren't well informed. So make sure you are.

gettingitsorted

SimoneT wrote: »

Thanks gettingitsorted. That's not good news, as this means we would have to wait another year for our money, in which it is not earning any interest. I am unsure as to wether we should get our friends to pay us back privately without them declaring us a creditors as we really want to re-invest the money asap.

unfortunatly Simone if the Official Reciever found out they were paying you privately you would be asked to hand back any money paid to you back to the OR.

SimoneT

Thanks wherediditallgo.

To say that I am more disheartened than ever would be an understatement. I am currently unsure when our friends are planning to declare themselves BR, this might still be some way off. Perhaps there is time yet for them to sell the car and give us the money if they are not going BR for some time? Anyway, as you say, we probably won't be getting any of this back.