Dealing with pre-bankruptcy creditors - a dilemma

rog2

As most of you will know, I had my own business (sole trader) prior to being declared bankrupt by HMRC.

Basically, I was importing industrial food processing machinery, from two principle suppliers, both based in Italy. When I was declared bankrupt, I only owed money to one of these companies - approximately £20k, which was made up of monies that were still owing to me, by customers. I included this debt, and declared the money owing to me, in my bankruptcy.

Since my discharge, both companies have been in contact with me, to discuss ways in which I can continue to represent them in the UK.
Discussions have, generally, been good - both companies are well established and leaders in their respective technologies. I have always had excellent working relations with them, and would dearly love to continue working with them, as I have been in this industry for 30 years and am 'a bit long in the tooth' to consider a total career change. Equally, prior to the problems which led, ultimately, to my bankruptcy, the UK market was a good market for both them and me. After several years of being in the 'doldrums' due to many factors, including BSE, SVD, Avian Flu and cheap food imports, this market is finally showing an upturn.

I have discussed, and in principle agreed, that the best way to develope a new relationship would be for me to work for them on a commission basis - rather that 'buy and sell', thereby avoiding the pitfalls associated with invoicing and collection of monies from customers. In order to finance the initial running expense, I asked both companies if they would be willing to cover my costs, until the business started coming in.

Up until this point, nothing had been mentioned about any debts prior to bankruptcy, but the company, to whom I HAD owed money, said that they could not consider any financial contribution and were looking at ways in which I could 'repay' my pre-bankruptcy debt, to them, out of commission.
I have pointed out to them, that I can NOT discuss any pre-bankruptcy debt, and that they should address any correspondence on this to my trustee.

At the same time, my 'conscience' is telling me that even working on a reduced commission is better than not working at all. If it helps them to redress their balance sheet - so much the better.

On the other hand - is this even legal? I seem to remember reading somewhere, possibly even on this forum, that any such agreement can only be a 'gentleman's agreement' and could not be enforced in law.
The other company, to whom I owed nothing, is prepared to look at initial financial help.

Any thoughts, please.

Richard_S

Hi Rog,

What the company is proposing hasn't really got anything to do with the amount you owed them at the point of being declared bankrupt, so there's no implications for showing fraudulent preference to creditors. In addition, once you've been discharged it doesn't matter what you do with the money you earn; if you choose to pay that to a former creditor then that's your decision.

All they're offering is a deal that's influenced by your former relationship; you get less in the way of commission until the debt is cleared. If their products are readily saleable and you're happy working under those constraints then there's nothing to stop you, and I for one wouldn't hesitate.

It is indeed a small world, I've been involved with food machinery in the European market, and if you're looking for a junior salesman I'd gladly quit this pile of sh1te job that I'm doing at the moment.:D

Rich

rog2

Richard_S wrote: »

Hi Rog,

What the company is proposing hasn't really got anything to do with the amount you owed them at the point of being declared bankrupt, so there's no implications for showing fraudulent preference to creditors. In addition, once you've been discharged it doesn't matter what you do with the money you earn; if you choose to pay that to a former creditor then that's your decision.

All they're offering is a deal that's influenced by your former relationship; you get less in the way of commission until the debt is cleared. If their products are readily saleable and you're happy working under those constraints then there's nothing to stop you, and I for one wouldn't hesitate.

Thanks Rich - I think you've told me what I both thought and wanted to know. :T :beer: :T

rog2

Richard_S wrote: »

Hi Rog,

It is indeed a small world, I've been involved with food machinery in the European market, and if you're looking for a junior salesman I'd gladly quit this pile of sh1te job that I'm doing at the moment.:D

Rich

With my track record, over the last couple of years, you're probably better off 'shovelling the brown stuff'. :rolleyes:
Seriously, though, yes it IS a small world, and you, more than most, will appreciate the turmoil that that industry has gone through in the last few years.

Richard_S

rog2 wrote: »

Thanks Rich - I think you've told me what I both thought and wanted to know. :T :beer: :T

It's a pleasure Rog,

Saying that "I wish you all the best" is just an understatement; I hope it all goes according to plan and I have the distinct feeling that it will.:beer:

Rich

hitch_2

Bear in mind that the £20k is not the true loss to the Italian company, within this amount will be their profit element, say 40% , brings it down to £12k, also they would have got tax relief on the bad debt, so to put them straight should be around £10k rather than £20k