Help! Demand to pay back personally 5k business overdraft

Greguk123

I ran a small business, it collapsed last year when I stopped trading due to double organ failure.  I'm trying to wind it up at the minute, but mean time Barclays have written to me saying they have removed the business loan facility and demanded immediate payment from me personally of just over 5k due to my personal guarantee.

I have no income and currently on £650 a month disability benefits to cover a mortgage and all bills (about £1k a month short).  So, I can't pay it.

I do not recall signing a personal guarantee, but maybe I did.

Any advice?  Should I write to them asking for a copy of the contract and my signature to check it's enforceable?  If so, should I then evidence my situation and make an offer of a monthly payment or something?  Are they obliged to work with me at a certain level of payment if I am in hardship and vulnerable?

Any advice appreciated,

Greg.

MattMattMattUK

Greguk123 said:

I ran a small business, it collapsed last year when I stopped trading due to double organ failure.  I'm trying to wind it up at the minute, but mean time Barclays have written to me saying they have removed the business loan facility and demanded immediate payment from me personally of just over 5k due to my personal guarantee.

I have no income and currently on £650 a month disability benefits to cover a mortgage and all bills (about £1k a month short).  So, I can't pay it.

I do not recall signing a personal guarantee, but maybe I did.

Any advice?  Should I write to them asking for a copy of the contract and my signature to check it's enforceable?  

You should, just for your own piece of mind, but remember that not signing a physical document means nothing, if you agreed to it as part of the application process for the business overdraft then that is enough. Also for clarity, I presume you mean you ran a small limited company? If you were a sole trader you are liable even without a personal guarantee.

Greguk123 said:

If so, should I then evidence my situation and make an offer of a monthly payment or something?  Are they obliged to work with me at a certain level of payment if I am in hardship and vulnerable?

Any advice appreciated,

Greg.

You can ask, but they are not obliged to and could instead take enforcement action against you. Based on your circumstances and lack of income they may obtain a CCJ then a charging order against your property.

Based on your current circumstances are you perhaps better selling your current property and moving to somewhere smaller/cheaper, provided you can port the mortgage? Do you expect to be back to work soon?

Grumpy_chap

I assume your business is Ltd Co.

Loans to small Ltd Co businesses nearly always require personal (Director) guarantees.

You will not be able to close the business while there are outstanding debts to be repaid.

cx6

you could discuss it with the bank and see if you can come up with an affordable repayment plan eg a personal.loan over a number of years

show willing to pay it off and i am sure they will help

Greguk123

cx6 said:

you could discuss it with the bank and see if you can come up with an affordable repayment plan eg a personal.loan over a number of years

show willing to pay it off and i am sure they will help

Thanks, I'm hoping so

Greguk123

Grumpy_chap said:

I assume your business is Ltd Co.

Loans to small Ltd Co businesses nearly always require personal (Director) guarantees.

You will not be able to close the business while there are outstanding debts to be repaid.

Yes small ltd company single director shareholder.  I have been advised that if I put the company into voluntary liquidation the bank will object as there is a bounce back loan (no other money owed other than than and overdraft) and investigate it, when they see no assets and my health they will likely withdraw their objections let if fold and then claw back from the guarantor, the government.  I wish there was another way but the company lost the premises, I lost my health and here we are.

Greguk123

MattMattMattUK said:

Greguk123 said:

I ran a small business, it collapsed last year when I stopped trading due to double organ failure.  I'm trying to wind it up at the minute, but mean time Barclays have written to me saying they have removed the business loan facility and demanded immediate payment from me personally of just over 5k due to my personal guarantee.

I have no income and currently on £650 a month disability benefits to cover a mortgage and all bills (about £1k a month short).  So, I can't pay it.

I do not recall signing a personal guarantee, but maybe I did.

Any advice?  Should I write to them asking for a copy of the contract and my signature to check it's enforceable?  

You should, just for your own piece of mind, but remember that not signing a physical document means nothing, if you agreed to it as part of the application process for the business overdraft then that is enough. Also for clarity, I presume you mean you ran a small limited company? If you were a sole trader you are liable even without a personal guarantee.

Greguk123 said:

If so, should I then evidence my situation and make an offer of a monthly payment or something?  Are they obliged to work with me at a certain level of payment if I am in hardship and vulnerable?

Any advice appreciated,

Greg.

You can ask, but they are not obliged to and could instead take enforcement action against you. Based on your circumstances and lack of income they may obtain a CCJ then a charging order against your property.

Based on your current circumstances are you perhaps better selling your current property and moving to somewhere smaller/cheaper, provided you can port the mortgage? Do you expect to be back to work soon?

Thanks for that.  Yes sold director shareholder.  Without transplant average is 5 years life expectancy, life is, difficult so no return to work I'm afraid.  Already on a bottom run property band A council tax and cant transfer my modest mortgage so I'm staying here.  Sounds like making an arrangement an figuring a way to fund it is likely the option.

Grumpy_chap

Greguk123 said:

Grumpy_chap said:

I assume your business is Ltd Co.

Loans to small Ltd Co businesses nearly always require personal (Director) guarantees.

You will not be able to close the business while there are outstanding debts to be repaid.

Yes small ltd company single director shareholder.  I have been advised that if I put the company into voluntary liquidation the bank will object as there is a bounce back loan (no other money owed other than than and overdraft) and investigate it, when they see no assets and my health they will likely withdraw their objections let if fold and then claw back from the guarantor, the government.  I wish there was another way but the company lost the premises, I lost my health and here we are.

Personal guarantees were not allowed to be linked to BBLS.

The money owed against the overdraft will likely have the Director's guarantee and therefore you will need to find a way to repay this amount.

Did you ever have "key man" insurance?  That would possibly be of use in a situation like this.

I suspect (hope) that the investigations into the BBLS will be rather more than simple cursory checks into current company assets.  One would expect that there will be some investigation to see how the BBLS funds were expended and that was inline with the rules of the scheme (to provide an economic benefit to the business and not for personal purposes).  The investigations need to be sufficient robust to establish that there was no fraud and I am not in any way suggesting that is the case for the OP who sounds like a very unfortunate set of circumstances that I would not wish on anyone. 

However, when BBLS was available there were some bright sparks on various social media platforms (including even on this forum) who suggested take £50k BBLS, buy TESLA, close company, default on BBLS, hey-presto, one free car courtesy of HMG.  None of these bright-sparks seemed to understand that the TESLA would be an asset of the company, or somehow would need to be legally transferred from company asset to personal asset for this to allow the idea to work.  Notwithstanding that, I am sure that there was at least one person somewhere who tried exactly that. 

As a tax-payer and as someone who took a BBLS and fully repaid, I'd want to see that the checks on any Ltd Co. that failed with outstanding BBLS debt were rather more than cursory.   The negative of that is more stress for genuine cases where circumstances happened.