Best way to cease trading as sole trader going bankrupt

Guy-Brush

Hello. I am planning on going bankrupt soon because the shop I opened has not been successful and although it is making a slight profit (most months - not recently) I will soon run out of money and not be able to pay the lease, bills, personal costs etc.

Going BR will also allow me to write off a credit card and personal loan (~17.5k) which were used to fund the business.

However, will the official receiver take a dim view of it if I was to wind up my business and sell off all the stock (in order to stay open and pay the rent a little longer) - BEFORE I go bankrupt? I would essentially be unemployed, having handed my landlord back the keys and emptied the shop leaving it nice and tidy.

The alternative as I see it is to go BR now and leave the shop full of thousands of stock items, furniture etc which are of little use or value to bailiffs and make the whole thing quite messy. I do not think that is fair and vacating the shop prior to going BR would make it easier for the landlord to forfeit the lease and move on.

So basically, would the OR be suspicious if I wound down the business to nothing now, or would they not care? I'm just worried they will think that I 'made' my business fail by stopping trading before going BR.

Does this make sense?

debt_doctor

Hi,
How would you "Stay open a little longer" if to make this happen you sold off all of your stock?
It is potential risky territory and could be seen as putting assets out of reach of your creditors but would also depend upon how much the stock was worth and the overall value of your debts.
DD

Guy-Brush

The main value of the debt is the commercial lease. The remaining years are worth nearly £30k which I cannot pay whether I stay open or not - the profit isn't there.

The stock is worth £3k so I was going to keep going a little longer to bring it down to about £1k.

The bankruptcy form is confusing me - it says how much to creditors 'say I owe to them'. At the moment none as I am up-to-date with payments but I know this will not happen for much longer. Can I go bankrupt now or am I supposed to wait until I run out of money and start defaulting?!

tigerfeet2006

But you do owe them as you have credit with them. Credit is a debt. So you put down what you still have left to pay.

Guy-Brush

I see! Should I put down say, the £600 monthly rental payment which will have missed by the time I file, or the entire value of the lease (which I don't know as it includes future utility bills, insurance etc) even though they may have no intention of claiming the whole lot against me, or anything at all? I mean they may just take the keys back and move on if they knew I'd gone BR.

adyj73

Surely the debt is the remainder of the lease as you are contractually committed to it? So 30 grand?

Guy-Brush

adyj73 wrote: »

Surely the debt is the remainder of the lease as you are contractually committed to it? So 30 grand?

Yes it is! :O

However they might see that I've taken the plunge and say forget about him, let's just let the place out to someone else. In which case what happens?

alltaken

The lease is the reason for your bankruptcy? The total that would be payable under termination is in a contract I assume - as others have said, it would be the remainder.

However, that is just to give the OR an idea of the total debt, the OR will include all unsecured debts no matter the value, unless fraudulent. So give the figure of the remaining lease on contract. You're worrying about details that don't matter.

Have you had a chat with the landlord? Could you explain that times are tough and you are literally facing bankruptcy unless the lease can be mutually ended. Long shot I know but worth a shot if it's the only debt pushing you toward insolvency?

Guy-Brush

alltaken wrote: »

The lease is the reason for your bankruptcy? The total that would be payable under termination is in a contract I assume - as others have said, it would be the remainder.

However, that is just to give the OR an idea of the total debt, the OR will include all unsecured debts no matter the value, unless fraudulent. So give the figure of the remaining lease on contract. You're worrying about details that don't matter.

Have you had a chat with the landlord? Could you explain that times are tough and you are literally facing bankruptcy unless the lease can be mutually ended. Long shot I know but worth a shot if it's the only debt pushing you toward insolvency?

Thanks for your message. No, not the only thing. There is also a loan which funded the set-up of my business which I am also unable to pay off with the profits from said business, and a small amount on a credit card.

I have spoken with the landlord a number of times over the last few months and the only thing he has suggested is that I assign the lease to someone else - not easy when the estate agent and legal fees to do so run into thousands and I have nothing! The premises is not in a great area either. He is now no longer answering my calls and I cannot imagine in a month of Sundays he would let me walk away from the lease without paying a substantial sum in compensation

So all in all, looking for a fresh start.

alltaken

Looks like bankruptcy is the best option, as others have said, put the amount as the remainder of the lease owing as per contract. The OR will be understanding that the amount could change but that's not your area of the insolvency, you declare, discuss the debt at interview and move on.

debt_doctor

As said, your bankruptcy debts are the full extend of your indebtedness - so the full life of the lease, full amount remaining under credit agreements etc.
The lease might be treat as an asset by the trustee - but that has no effect on you.
No matter what value debt you put down, your total debt will be captured within your bankruptcy whether you accurately reflect it on the forms or not - that's one of the good things about bankruptcy.
DD