Is business overdraft debt going to affect my credit?

tgirl
tgirl Posts: 52 Forumite
edited 18 January 2016 at 2:01PM in Credit file & ratings
Hi

I closed my ltd company last year and there is an outstanding overdraft of £1000 for my old business account. The bank - santander, have said that I signed a personal guarantee at the time of opening the business account.

I also have a current account with the same bank but its not my main current account as I use an alternative. Can anyone advise on whether this business debt has to be repaid? Or will it affect my credit?

I told them I cant afford to pay it back in full right now. I said I can manage £20 per month. They said they want me to do a Common Financial Statement and if its not paid in full within 10 months they will register a default. Will this default be with me personally or my old ltd company that is now closed?

Any guidance appreciated.

Thanks

T

Comments

  • How do you close a limited company with debts outstanding? A genuine question because if it's a limited company then isn't your liability as a director limited to whatever you invested in the beginning? If you want to close a limited company with outstanding debts then normally it would have to be wound up by an official receiver. Happy to be corrected on this.

    If the bank said you signed a personal guarantee, do you have a copy of that? If not I would request they send you a copy first of all before planning the way forward.
  • signing a personal guarantee does make you jointly and severally liable for the debt, and effectively negates any of the limited liability protection offered by a limited company.
    The creditor can chase you personally for the debt and any default/CCJ/charging order (if applicable) would be registered in your name.


    as sinkingfast suggests, obtain a copy of the PG from the bank and get it checked if possible for validity, it may not have been drawn up correctly or executed correctly, so may not be valid.
    Mortgage = [STRIKE]£113,495 (May 2009)[/STRIKE] £67462.74 Jun 2019
  • tgirl
    tgirl Posts: 52 Forumite
    How do you close a limited company with debts outstanding? .

    Thats why I closed it as it was not making a profit and was no longer sustainable. Closing a company is possible as long as you inform the organisations you owe money to. Its up to companies house to close the company and they did that already.
  • PaulW922
    PaulW922 Posts: 1,039 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    When you opened the Santander business account and became a signatory that almost certainly included a clause to the effect that as a director you would be liable if the company became unable to pay. It is a common 'clause' that people are frequently not aware of.

    Closing the company is not up to Companies House - you are responsible as a director for notifying them and as said above, if it has debts, it may need to be wound up. CH can strike the company off if it does not render its returns but that does not affect the debt situation I'm afraid.

    The default will probably be against both you and the company but it may be wroth checking that with the bank.
  • MEM62
    MEM62 Posts: 5,268 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    How do you close a limited company with debts outstanding? A genuine question because if it's a limited company then isn't your liability as a director limited to whatever you invested in the beginning? Yes, unless you start to put up personal guarantees in order to obtain finance for the business in cases where the business is not deemed to be sufficiently sound.



    ............
  • SeanG79
    SeanG79 Posts: 977 Forumite
    Part of the Furniture 500 Posts Name Dropper
    You signed a personal guarantee, so any default, late payment, ccj, etc will reflect against the company AND your personal credit. Banks very seldom offer an overdraft to a small business without personal guarantees.

    An overdraft is repayable on demand, because you have ceased to trade in the limited company, the bank will have called in on the overdraft. If you have not settled the overdraft, I would suggest you take a look at your credit file with Credit Reference Agencies. I expect you will already find either late payment markers or AP/AR (Arrangement to Pay) markers - AP/AR markers are read by lenders the same way as a default.
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