In a mess and need advice

mortgage100 · 9 August 2017 at 12:24PM

Hi, I am in a financial mess - here is the short version

Run a small Ltd company, only Director is me, no staff - £12k overdrawn directors loan, CT bill of £14k

Mortgage - interest only, joint with a relative - no equity, abotu £20-25k negative equity - no means to pay at the end of the mortgage

Various unsecured debts to the total of £5k on a debt management plan

£1100 council tax bill with bailiffs which I am paying off

Not much coming in each month due to struggling business and overheads

So, my question is - do I go bankrupt and close the company? If so, would I be able to work as a sole trader doing the same type of work without the massive overheads?

With the mortgage being joint and in negative equity, what is the likelyhood this would be taken by the OR? The relative is 60 years old and would struggle to pay a full rent on a house on his own.

I don't particularly want to go bankrupt, the thought terrifies me but I really don't know if I can trade out of this and cover all of my outgoings

Any advice welcome please

Arleen · 9 August 2017 at 12:43PM

Sorry to hear about your struggles!

Someone will soon come and tell you about the personal bankruptcy, but let me help with the business side of it. You will need to declare the business as bankrupt too, but the fact that you owe taxes on it may cause a problem. Hefty CT bill of 14k says that company was making a profit - where did that money go? Is this a bill for last year, or the bill that is due in Oct/Nov this year?

And once your bankruptcy is in place, and you will resolve the LTD, you will be able to continue working as a sole trader but you will have to do that under your own name.

mortgage100 · 9 August 2017 at 12:46PM

Thank you Arleen. That is good to know I can trade a sole trader. The CT tax sadly has built up over 3 years, kept thinking things would improve but sadly not the case. I have used the money coming into the business as running costs and salary. I have never took a heafty salary or anything, was never splashing out so to speak, I think it my memory serves me correct I took £23K salary last year and about £22K last year

Arleen · 9 August 2017 at 12:56PM

mortgage100 wrote: »

Thank you Arleen. That is good to know I can trade a sole trader. The CT tax sadly has built up over 3 years, kept thinking things would improve but sadly not the case. I have used the money coming into the business as running costs and salary. I have never took a heafty salary or anything, was never splashing out so to speak, I think it my memory serves me correct I took £23K salary last year and about £22K last year

Salary is fine as on salary you pay taxes and that would be reflected in lower CT tax. I guess the rest of it was taken out as directors loan - you've mentioned that this is 12k overdrawn. This part is going to be a problem, as this is money that could've been used to pay the tax obligations and company liquidator will want to pursue this debt from you.It also means that your liquidation will almost certainly highly scrutinized, which will be quite stressful.

The loan may wind up being written off by the liquidator, or just written off by the personal bankruptcy, you will likely simply have to wait and see. I am also surprised that the tax man didn't send the CT debt to collections yet.

National_Debtline · 9 August 2017 at 1:55PM

Hi Mortgage100

I’m sorry to hear what’s happened. Have given a personal guarantee on any of the limited company’s debts? If not it would appear your personal debts are £6100. That’s a relatively low figure to consider bankruptcy.

The first thing I would advise you to do is get advice from Business Debtline on how to deal with the business side of things. I think you need to decide what’s going to happen with the business first, and then you can consider how to deal with your personal debts.

If you were to personally go bankrupt and the mortgage is for your residential property (rather than the business) you may not lose it due to the fact it’s in negative equity. However if you have no means to pay off the capital at the end of the term I’m afraid in the long term you may not get to keep it. This is a complicated area and you really need to speak to one of the free debt advice agencies for more detailed advice. Good luck with it all.

Susie
@natdebtline