Sole Trader and Bankruptcy -

jcarver007

H All,

I have previously posted on here about how a sole trader copes with bankruptcy but looking for others experiences of this...

Do the majority of sole traders get to carry on trading under their original business name? Or is it the norm for the business to be wound up and cease completely?

Reason I ask this is that my business is profitable if I am not paying the debts I am paying.

Also if i do get to carry on trading under my business name, what happens to any profit...say for instance I need to buy a new piece of equipment. Also does the OR allow for money to be put away as savings or even to take family away on a cheap holiday?

And from what i can gather the bankruptcy period is up to 1 year and free from bankruptcy after this? And it stays on credit checks for up to 5 years?

Also if I am looking at going bankrupt should I carry on paying my debts still such as bank loans and credit cards or cease doing so? Will the OR take a dim view if I have stopped paying them?

Lastly has anyone had any luck with arranging a payment plan with banks and credit card companies to pay of part of what is owed instead of going bankrupt? And is the effect on credit history much the same as if going bankrupt anyway? I have debts of around £28k and was thinking whether to offer a part settlement to all the creditors.

Any advice much appreciated.:)

longtermplanner

Call Business Debtline for the first set of questions: http://www.bdl.org.uk/

Lastly has anyone had any luck with arranging a payment plan with banks and credit card companies to pay of part of what is owed instead of going bankrupt? And is the effect on credit history much the same as if going bankrupt anyway? I have debts of around £28k and was thinking whether to offer a part settlement to all the creditors.

How large a lump sum do you have available? Have you already defaulted on the debts? Where does the money for a settlement come from?

jcarver007

Business debtline seemed vague with regards to questions of do sole traders get to carry on trading under their original business name and are businesses wound up and cease completely.

How large a lump sum do you have available - no lump sum but was thinking more of paying of a certain ammount over a period of time rather than bankruptcy - would the bank and credit card companies be more willing to enter into this as otherwise in bankruptcy they are likely to receive nothing at all?

Have you already defaulted on the debts? - I have stopped paying towards the bank, credit cards. HMRC I am currently making payments to clear what is owed on self assessment.

Where does the money for a settlement come from? - as mentioned the settlement would be more an arrangement to pay between myself and those I owe to. The business does make a profit, but with the money coming out to pay bank and credit cards it doesnt and it struggles. So the money for any arrangement would come out of the profit the business makes.

Thanks

longtermplanner

jcarver007 wrote: »

How large a lump sum do you have available - no lump sum but was thinking more of paying of a certain ammount over a period of time rather than bankruptcy - would the bank and credit card companies be more willing to enter into this as otherwise in bankruptcy they are likely to receive nothing at all?

The name for that as a formal arrangement is an IVA.

As an informal arrangment, no creditors will not agree to this, how do they know you will make the payments? They will accept a full & final offer as the money is there on the table, bird in the hand etc. But they won't agree to you repaying half over the next 5 years if that is what you were thinking of.

debtinfo

Hi Jcarver, to start with lets get some terminology correct,as its important if people are going to give correct answers. do you have a limited company? if not then you don't get "wound up"

debtinfo

secondly what sort of business do you do?

jcarver007

debtinfo wrote: »

Hi Jcarver, to start with lets get some terminology correct,as its important if people are going to give correct answers. do you have a limited company? if not then you don't get "wound up"

No its not a ltd company

jcarver007

The business is with events and weddings supplying services of a catering nature. Minimal stock and equipment, premises are rented, vehicles are someone elses and Im a named driver only.
The business does make a profit, seasonal and the profit fluctuates.

debtinfo

ok so lets not use the "wound up" words again then as they apply only to companies not sole traders.

You say you have rented premises, what are these, industrial, retail? what sort of contract do you have for this, is it a lease? did you pay an upfront fee to get the premises? how long is left o the contract? check your paperwork, is there a bankruptcy or insolvency clause?

why are the vehicles (how many and what are they?) in someone elses name? who? and how did that get to be the case?

jcarver007

debtinfo wrote: »

ok so lets not use the "wound up" words again then as they apply only to companies not sole traders.

You say you have rented premises, what are these, industrial, retail? what sort of contract do you have for this, is it a lease? did you pay an upfront fee to get the premises? how long is left o the contract? check your paperwork, is there a bankruptcy or insolvency clause?

why are the vehicles (how many and what are they?) in someone elses name? who? and how did that get to be the case?

The premises I pay monthly rent for the use of part of them. No contract just an informal arrangement.
The vehicles (2 a car and a van) are actually a friends and I pay for the insurance etc but they are their vehicles...I am just a named driver on there.

National_Debtline

Hi jcarver

A couple of broad points to be aware of if you are a sole trader contemplating bankruptcy...

Trading name - you are not obliged to keep the same trading name as you had pre-bankruptcy, but if you change it you must disclose the old trading name to those you do business with.

In any case, as a sole trader you will be personally liable for any debts you incur in the running of your business, and a change of trading name will not alter this.

What happens to any profit made after bankruptcy? Normally you would be required to hand over any "surplus" income during your bankruptcy (income over and above what is needed to meet your essential living costs). These contributions can continue for up to three years. The OR may allow you to request a halt to these contributions in exceptional circumstances - for example, a broken boiler in the middle of winter - but do not expect to be given much/any scope to specifically put money aside for savings/holidays.

Purchases of stock/equipment would be looked at on a case by case basis, I expect.

It doesn't sound as if you are reliant on any credit lines for running your business - this is a good thing, as bankruptcy would make it harder to keep any trade accounts open.

Bankruptcy is a big, big step so please do not go in head first.

Regards

Dennis
Twitter: @natdebtline