Huge debts.. Desperate for help and advise

Resetrequired1987

In 2021 I set up and ran my first business which ended in disaster and has landed me with huge debts.

Some of my debts are from my first year trading as a sole trader and I have full liability. I switched and traded as a company in my second year and the company is also being persured for other debts, some of which I have personal guarantees against so they will likely catch me up at a later date.

I stopped trading 8 months ago due to debts owed to HMRC alongside suppliers. My company still exists but is no longer trading. 

I have also let my personal debts spiral out of control and I am behind on multiple bills, utilities, council tax, phone bills - pretty much everything and I owe huge amounts of money. 

I have some goods that I purchased on finance that I owe money for. 

I have had overdrawn bank accounts close down on me and request payment.

I owe that much that I geniunley dont know how much I owe, who I owe to or what may come next.. Letter after letter, constantly..

I have had collection agents knocking on the door, most recently a PAYE HMRC debt of nearly 19k and previously for a ltd company debt of 10k due to a supplier (these have since threatened to pursue me personally)

There are also multiple company tax debts and liabilities that could also catch me up in the future.

My circumstances are that I essentially have nothing - I live in council / housing association rented property (I am behind on rent but not by much this could be resolved) I dont own a vehical (I borrow a family members car worth less than 1k) I have no savings at all and minimal assets, basic household items plus a phone and tablet on contract, an old TV old computer, games comsole etc..

I have recently gone back into full-time employment which is secure and I earn around 30k per year. I probably owe in excess of 60k with potentially more to catch me up that I am unaware of. 

I have had bankruptcy suggested to me - but have also been told that it a debt catches me up after I go bankrupt it will just put me back to square one as it will not count in that bankruptcy. I was told I needed to wait until my company was wound up and all personal guarantees have caught me up before I trigger any action. 

I really dont know what to do, Ive messed up and learnt a lot the hard way. Ive been trying to chip away at some smaller debts but theres no hope with any of this in reality, Im done for and really at rock bottom mentally, I struggle severly with my mental health, I am very close to the edge. 

Really need some solid advice on the best course of action. I am also worried and bankruptcy and the process that would be required  

Example - If I went bankrupt today for the 19k tax debt, could I also include the 10k supplier debt that is chasing my company (as they will chase me personally eventually due to PG) BUT if I dont do something bailiffs will eventually gain access and take everything!? I need to take some kind of action. 

I can answer any further questions - any advice here would be very welcome, thank you.

blue_eyed_girl123

You probably need to get in touch with a debt advice agency - https://www.moneysavingexpert.com/loans/debt-help-plan/ - they will help you figure out what to do next and won't judge, just help you 

birdsfoottrefoil

Hi! I haven’t any advice except that you’ll probably be advised to do a “statement of affairs” so things are clear https://www.lemonfool.co.uk/financecalculators/soa.php 

I hope you get sorted!!

RAS

It is really important now that you have income coming in that you do a few things. You need to stabilise your situation.

1. Get a new personal basic bank account not related to any banking group to whom you owe money. Barclays and the Co-op are ordinary options but others prefer Monzo, Starling etc. Do not use the switching service as that transfers any DDs set up by your creditors. You'll get a card but no overdraft. Get your salary paid in there. Set up the new DDs for rent, CT and utilities. 

2. Sort out your rent and CT arrears. If your LL are amenable, pay back over a few months so you can sort out the Council Tax as that can end in bailiffs. Try to negotiate with your Council re the liability order if possible, otherwise keep doors and windows locked.

3. Feed yourself. You can do a lot with a bag of pasta and if you cook, cool and reheat, it is healthier. But do get a decent diet.

3. Make a nominal additional payment to your utilities, even if it's £1 per month until the rent and CT are sorted.

4. Stop paying all other personal creditors other than HMRC (if you have any sort of deal with them). 

Next,

1. Business debts are covered by different rules so you need to talk to business debtline to establish which debts could be covered by closing down your company. It a good idea sort out the business insolvency promptly. Don't drag that out. Not least as that leaves you with personal debt only .

2. HMRC might make you BR, they are one of the few that do.  It appears that some of your HMRC debt is business debt and some personal? Try to start putting aside money to cover BR fees as soon as your company is dissolved, although if you've still got a functional credit card the OR won't mind if you use that to pay the fee or part of the fee.

3. Meantime start making a Statement of Affairs, which will form the basis of your income and expenditure account when you go BR. That needs to cover all your likely expenditure, including all the stuff you've not been spending on in the last year or so. The allowances aren't public but they are quite generous. Post your starter for ten here as there are several folk who can advise you if anything is missing and if you've over egged anything. Don't expect golf club fees but do expect medical and dental, holiday, a cheap car, a cheap hobby etc.

It will work out. The important thing is that you've learned a hard lesson and are taking action to resolve the problems. 

Sorry, forgot. 

If your personal debt ends up below £50k, you might be eligible for a DRO. As that's the new limit.

The downside is that a DRO covers those debts that you list. The upside of bankruptcy is that any debt that crawls out of woodwork which derives from activities undertaken prior to the date of bankruptcy is included even if the debt wasn't among those you told the OR about at the time. 

luvchocolate

Sound advice above 

Resetrequired1987

Thank you really appreciate this advice and I've started to take this action today! 

fatbelly

Resetrequired1987 said:

I have had bankruptcy suggested to me - but have also been told that it a debt catches me up after I go bankrupt it will just put me back to square one as it will not count in that bankruptcy. I was told I needed to wait until my company was wound up and all personal guarantees have caught me up before I trigger any action. 

Example - If I went bankrupt today for the 19k tax debt, could I also include the 10k supplier debt that is chasing my company (as they will chase me personally eventually due to PG) BUT if I dont do something bailiffs will eventually gain access and take everything!? I need to take some kind of action. 

I can answer any further questions - any advice here would be very welcome, thank you.

That isn't quite true. There are two definitions of bankruptcy debt in the Insolvency Act s382, which is so buried it's no wonder people miss it.

One is any liability existing at the bankruptcy date

The other is any debt which arrives after that, by reason of a liability incurred before that date.

This stops creditors from delaying an invoice if they know someone is going bankrupt

In your case, bankruptcy makes sense but I would not rush into it as HMRC may well do this for you and save you the £680 fee.