Lots of questions before we declare bankrupcy

katyp

Hello,
I will try to keep this as brief as possible.
Background: My husband and I owned a limited company which has been put into voluntary liquidation. The business struggled for several years but things had started to look up over the past couple of years. Unfortunately, an investor decided the pull out out, hence the decision to liquidate. The liquidation is being dealt with by an official receiver.

As a consequence of the above, we have been left with several personal guarantees, which we cannot pay back. We also have a small amount of personal debt and had/have three investment properties.

Two of the investment properties have been repossessed, the third one is tenanted with no mortgage arrears. Our family home has no arrears.

The liquidator sold the assets of our company to a third person, and we are now employed in the new business, earning about £42k between us.

One of our debts is a PG on a sizeable business convertible loan. This debt is massively disproportionate to the rest of the debts. I will refer to this as Debt 1 to make things easier.

So..

I have been working with Stepchange to find the best way forward. It was thought that an IVA might work, but because Debt 1 made up more than 75% of the total debt, everything swung on this creditor. The sale of the remaining investment property was included in the IVA proposal.

At our meeting of creditors, Debt 1 said that the only way they would agree to an IVA was if the family home was sold.

Obviously, this is a massive blow to us, as the whole point of an IVA was to keep the family home. But it is what it is, and we are now looking at our next steps.

I have a few questions about the family home and our options on an IVA/bankruptcy, and also a few more general questions if we decide to declare bankruptcy, which I will start a new thread for.

So, my questions are:

1. If the home has to be sold anyway, is there any point in continuing with the IVA, or would bankruptcy be a better (or less bad) option?

2. I have written to the creditor asking if they would accept a charge on the house instead of an outright sale, but I doubt they will consider it. This was done at Stepchange's suggestion, as this would then make the creditor secured, and they could be removed from the IVA, which could then go ahead without this creditor.

3. If we decide on bankruptcy, would Debt 1 have any power to insist that the house was sold within a certain timeframe, or would that all be down the receiver?

4. If we went bankrupt, the amount we would have to pay on rent would be substantially more than we currently pay on mortgage. Is it even slightly possible the OR might accept a larger monthly payment in lieu of keeping the house? Probably not.

4. Other (maybe?) relevant points: The amount of equity in the family home is less than 33% of Debt 1. We are both in our 50s and stand to inherit from our parents (all still alive, all in their 80s) at some point - not huge sums but likely to be over £100k from each set of parents. We have two children at home, one who is 11 and one (who has suspected Asperger's) 14.

So that's it, I think. Interested to hear suggestions and comments on the above, especially about the IVA/bankruptcy question.

As I have said above, it is what it is, and this is the risk of giving PGs to business debts. But it does feel particularly unfair that we are being forced to sell our family home when Debt 1 was European money introduced into our business via a investment house, and we employed five people for six years as a result of it.

More general questions about bankruptcy to follow ...

lisyloo

katyp wrote: »

We are both in our 50s and stand to inherit from our parents (all still alive, all in their 80s) at some point - not huge sums but likely to be over £100k from each set of parents.

Your inheritance cannot be relied upon.
Any of the parents may need to pay for carers at home or residential/nursing home care, or they could indeed decide to spend it.


If they decided to make a gift to you now then that would be different, but could be problematic for them later if they want means tested benefits (such as long term care).


I appreciate you want to cover all angles, but don't see how that one is going to help I'm afraid.

katyp

Hi Lisy, thanks for your response.
I mentioned the potential inheritances not as anything to be relied upon as such, but thought it relevant to the timeframes when deciding on an IVA or bankruptcy.
Am I correct in thinking that any inheritance would be ours to keep after three years if BR, but after six years if we decided on the IVA?

lisyloo

You can keep your inheritance after you are discharged from bankruptcy and after the end of an IVA.


You've probably thought of this already but you could suggest your parents change their wills, perhaps in favor of your children at least during the term of the bankruptcy/IVA.

TheGardener

katyp wrote: »

So, my questions are:

1. If the home has to be sold anyway, is there any point in continuing with the IVA, or would bankruptcy be a better (or less bad) option? A decision you should take with professional advice

2. I have written to the creditor asking if they would accept a charge on the house instead of an outright sale, but I doubt they will consider it. This was done at Stepchange's suggestion, as this would then make the creditor secured, and they could be removed from the IVA, which could then go ahead without this creditor.

3. If we decide on bankruptcy, would Debt 1 have any power to insist that the house was sold within a certain timeframe, or would that all be down the receiver? No - all down to the OR - the creditors have little say in anything in BR so its in Debt 1's best interest to keep you in an IVA

4. If we went bankrupt, the amount we would have to pay on rent would be substantially more than we currently pay on mortgage. Is it even slightly possible the OR might accept a larger monthly payment in lieu of keeping the house? Probably not. As the OR has to take all the costs (solicitors/agents etc) out of the proceeds of the house, it is worth negotiating with them as to how much they would be willing to accept if you were able to buy the OR's interest back - any members of the family who could find 2/3rd (ish) of the equity in the house?



4. Other (maybe?) relevant points: The amount of equity in the family home is less than 33% of Debt 1. We are both in our 50s and stand to inherit from our parents (all still alive, all in their 80s) at some point - not huge sums but likely to be over £100k from each set of parents. We have two children at home, one who is 11 and one (who has suspected Asperger's) 14. Get your parents to leave the inheritance in trust to the kids - if they live long enough for you to be clear of BR - then they can change their wills back again. Otherwise - if the inheritance comes your way while you are BR, the OR will get the lot.

So that's it, I think. Interested to hear suggestions and comments on the above, especially about the IVA/bankruptcy question.

As I have said above, it is what it is, and this is the risk of giving PGs to business debts. But it does feel particularly unfair that we are being forced to sell our family home when Debt 1 was European money introduced into our business via a investment house, and we employed five people for six years as a result of it.
BR is not an easy route - but once you are BR - all financial responsibility is lifted from you and you get to start over.

More general questions about bankruptcy to follow ...

BR is a way to take back control of things that may have seemed like trying to hold back a runaway train - plan it well and get good advice

katyp

Thanks very much for taking the time to read my thread so far Lisy and Gardner.
I think I will maybe suggest forgetting about the inheritance for now for the purpose of this thread, as it seems to be derailing it slightly.
For the record, we will most probably decide what to do about it when we decide what to do. Obviously the difference between not inheriting after one year (bankruptcy with no IPA) and six years (IVA) will make a difference, if I have understood things correctly?

TheGardener, if I may, I will answer your comments on this and my other thread one by one.

1. If the home has to be sold anyway, is there any point in continuing with the IVA, or would bankruptcy be a better option? A decision you should take with professional advice - where will I get this advice? I am already working with Stepchange and they have effectively said it's up to us


3. If we decide on bankruptcy, would Debt 1 have any power to insist that the house was sold within a certain timeframe, or would that all be down the receiver? No - all down to the OR - the creditors have little say in anything in BR so its in Debt 1's best interest to keep you in an IVA I thought that was the case and that's very interesting. Although, as said before, because the debt is European fund money, the investment house does not always act in the most logical way. They want the house sold and money to them by Dec 2019 at the very latest, so if we went for the IVA, they would be piling on the pressure from Day 1

4. If we went bankrupt, the amount we would have to pay on rent would be substantially more than we currently pay on mortgage. Is it even slightly possible the OR might accept a larger monthly payment in lieu of keeping the house? Probably not. As the OR has to take all the costs (solicitors/agents etc) out of the proceeds of the house, it is worth negotiating with them as to how much they would be willing to accept if you were able to buy the OR's interest back - any members of the family who could find 2/3rd (ish) of the equity in the house? That's a possibility



4. Other (maybe?) relevant points: The amount of equity in the family home is less than 33% of Debt 1. We are both in our 50s and stand to inherit from our parents (all still alive, all in their 80s) at some point - not huge sums but likely to be over £100k from each set of parents. We have two children at home, one who is 11 and one (who has suspected Asperger's) 14. Get your parents to leave the inheritance in trust to the kids - if they live long enough for you to be clear of BR - then they can change their wills back again. Otherwise - if the inheritance comes your way while you are BR, the OR will get the lot. See above.

BR is not an easy route - but once you are BR - all financial responsibility is lifted from you and you get to start over. Well that's something, I suppose. I am finding the whole process of insolvency a lot less stressful than worrying about paying staff when we had the business, so a tentative :T

TheGardener

katyp wrote: »

If we went bankrupt, the amount we would have to pay on rent would be substantially more than we currently pay on mortgage. Is it even slightly possible the OR might accept a larger monthly payment in lieu of keeping the house? Probably not. As the OR has to take all the costs (solicitors/agents etc) out of the proceeds of the house, it is worth negotiating with them as to how much they would be willing to accept if you were able to buy the OR's interest back - any members of the family who could find 2/3rd (ish) of the equity in the house? That's a possibility That is a great positive! When you get to the point of discussing the house with the OR ask them what they will accept - remember their own time and fees also have to come out of the proceeds as well as all the costs of sale so make a low offer and haggle to the point where the OR might accept your offer



BR is not an easy route - but once you are BR - all financial responsibility is lifted from you and you get to start over. Well that's something, I suppose. I am finding the whole process of insolvency a lot less stressful than worrying about paying staff when we had the business, so a tentative :T

Not waking up in a cold sweat with my heart racing at 3am and actually being able to laugh at one of the kids jokes - they were the some of the best outcomes of BR for me