Can you help please?

Toto

Hi

Somone has posted a question on the house buying board and I'm worried about the advice they will get there. I've directed them here but could you guys take a look in case she doesn't find her way here?

http://forums.moneysavingexpert.com/showthread.html?t=570176

Thanks darlings xxxx

rog2

Toto wrote: »

Hi

Somone has posted a question on the house buying board and I'm worried about the advice they will get there. I've directed them here but could you guys take a look in case she doesn't find her way here?

http://forums.moneysavingexpert.com/showthread.html?t=570176

Thanks darlings xxxx

Consider it done, Toto. :T

fermi

Just had a look, and posted.

Toto

Thanks guys, I knew I could count on you xx

wok_boy

As usual you get someone narrow minded person making a judgement in that thread.

stubie

AK-27 post from the other forum.....I was switching form 1 to the other

Hi everyone, after reading everyones contributions to this site for so long, im now going to take the plunge and ask for advice for myself!

Ive got debts of £45k and hubby £40k. I thought i was managing fine as i have a good job and could cope with the repayments and contribute to the household. Also, about 1/3 of debt is student loans etc. a year ago i decided fulfill my dreams and set up my own business. I used some savings i had and borrowed a lot from my mum(her life savings basically). This was back in May this year. However, now things have changed drastically! My hubby's given up his job, decided to go bankrupt and enrolled on a course at the local college all at the same time!:mad:

This had been in the pipeline for years, but i never thought he would go for it all at the same time! now this has left me in a really bad way. i have to now support him, run our household and continue to make payments to my own creditors. I took some advice from both the CAB and CCCS, who say i should declare myself bankrupt too. I dont want to, but with the way things are going i may well have to in the near future as i am now overspending by £300 every month!:eek:

i want to now return at least some of my mums money back to her as there is no point in continuing with the business but i am afraid that the OR may later query the amount. I have nearly £10,000 of my mums money left from the money she lent me originally (£18500)

I dont want my mum to lose out esp as she took a huge gamble lending me the money.

Will i get into trouble if i just returned the money now and maybe went bankrupt in the next 6 months-years time?

Thanks so much in advance for your replies.

wherediditallgo

Yes, the OR would take a dim view of you paying back the debt to your mother. To the OR, all your creditors are entitled to equal treatment, whether they're family, a friend, a bank or the mail order catalogue. It would be fine if you made a lump sum offer to all your creditors including your mother, & if your mother was the only one to accept it, but you have to be seen to make the offer in writing & they have to be seen to reject it. The very least you should be seen to do is pay each of them the same amount of money, so that everyone gets the same & none are being treated differently from the others. If you only pay your mother without paying the same amount to the other creditors,

(a) the OR will look on it that you've treated your mother as a 'preferential creditor'. They can also ask her to repay the money back into your estate. Although they can't make her BR for not doing so, I've recently heard that they can take other measures against her for such refusal, such as a CCJ & sending in bailiffs for non-payment.

(b) depending on the circumstances, the OR can impose a BRU/BRO on you. You can find more information on this on the Insolvency Service website here, but basically this means that any restrictions on you as a BR can be extended to a maximum period of 15 years.

You've already taken professional advice, which is the first step & definitely the right thing to do. I think you should explain the situation to your mother, & explain that you can't pay her back the remainder of the debt because of your financial position just yet, but once you've got your BR sorted out, you'd like to pay her monthly amounts, which you may be able to do out of whatever living expenses the OR allows you. I also suggest you make an offer to all your creditors so that you split whatever money you have left between them. When you go BR, the OR will take any savings you have into account, so it's pointless holding onto the £10k until then, as you won't get to say what happens to it. Keep some of it back to cover your BR fees & your bills while you're sorting out a new bank account (it's better to do that after your court hearing), & so that if the pressure of the creditors gets too much for you you're not having to delay things while you try to save up the money for going to court.

backontheup

Could it not be argued that you borrowed £8500 from her and just return the rest of it. They can see the big lump sum going from her account and then being returned. You havent 'made' money and it was there in emergency? ie you didnt need to borrow that much from her in the first place.

Family are not banks, and you do not have credit agreements and structured payment systems with family. I know that is what I would argue.

If I were you, I would return the remaining money to your mother and then argue it out with the OR. Dont let your mothers life savings disapeer down a big black hole. (Of course you will also need firm advice on this, but my gut feeling with be to return it and argue)

wherediditallgo

I see what you're saying, backontheup - when you borrow from family, you don't sit there totting up interest payments etc & getting everything written in blood. My concern would be that, as it's such a large amount, the OR may well feel obliged to hand out a BRU rather than take the fact that the money wasn't ever used into account. Playing Devil's Advocate here, the OR could take the view that although the money was just there in an emergency & wasn't used,

• it could have been & it was the OP's choice not to do so,
• it could have been used to pay something to all the creditors rather than just one, &
• the loan was no different from any other - the fact the OP got it from a relative would be irrelevant to the OR. If the OP had got a 0% loan/credit advance from a company & then hadn't used it, he couldn't have just returned the money because he didn't need as much as he thought, he would have been required to split it between all the creditors.

I've had a quick look at the Bankruptcy Restriction Register & there are two cases on there at the moment for entering into a preference. This 5-year BRU resulted from just under £9,300 being returned, & this 2-year one resulted from the return of under £5k.

I don't know how many creditors the OP has, & it may well be that if they only have a few creditors the OP's mother may get a larger amount as a result rather than say only £500 because of splitting the £10k between 20 creditors. It may also be that the OP's mother may be happy to spread the payments on the remaining balance. And if they're working in a field where the BRO restrictions aren't going to matter, then the risk of this happening aren't going to worry them. I think the OP should talk to their mother about the options, & also take professional advice on this, as £10k is a lot of money to hope the OR will ignore.

rog2

I tend to agree with backontheup, here. The OP has actually stated that bankruptcy would, probably be 6 - 12 months down the line. If, on the other hand, she was faced with imminent bankruptcy and paid the money back to her mum just a few weeks before bankruptcy, then that would, in my opinion, be clearly seen as 'favouring' one creditor over another.
However, most of us who have run small businesses can appreciate just how quickly events/situations can change and just how 'long' six months can really be. Certainly, in my case, I was still 'hoping to turn things around' just three months before bankruptcy.
I appreciate the two examples that wdiag has highlighted, but in both cases it was shown that they transferred the money 'knowing' that they were facing insolvency, and whilst stubie is seriously contemplating bankruptcy, nothing is as yet 'cast in stone'.
It is a dilemma, as the OR does have sweeping powers in the case of 'preference' and can, in some cases, take steps to actually reverse payments.
I am sure, however, that there must be room for 'compromise'. Stubie has stated that she would like to return 'at least some' of the money to her mum, rather than simply 'ALL', so, perhaps she should have a good chat with her mum, explain that the business is not as financially sound as she would like, and pay back, say 50% of what she owes, assuming that she has sufficient funds to do so without immediately prejudicing her other creditors. If she, then, continues to trade for a further six months and the business does not improve, she can then consider bankruptcy as an option.
I am sure that, in her heart, stubie would like nothing more than to turn her business back on to a sound financial footing, and that, at this stage, bankruptcy is only one of the options she is considering.

backontheup

Great post Rog. That is certainly the route I would take.