Questions you have before making a decision to go Bankrupt and the Bankruptcy process

Moderators: TalbotWoods, JaneClack

By karluk29
#350413 hi, i hope someone can help and im sorry for the length of the post

my wife's 15yo business has took a downward turn, she tried to get out of the slump
by buying stock on a number of personal credit cards and hoping for a good xmas.
this didnt work and we now have £77k worth of debt. the cards are maxed out and costing
£800 a month minimum payment. anyway the break down is this:-

£42k on cards

£20k secured loan on the house

£15k unsecured "joint" loan

£140k house in "joint" names (mortgage of £97k)

we have not as yet defaulted on any payment but the shop isnt doing well so we really
need a way out

1. we sell the shop, may get £25-30k and do a lump sum IVA we heard about and hope
they accept but the shop could take 2 years to sell

2. she goes bankrupt but what are the issues with the joint loan and the house?
i assume/hope the equity would be £25k so will i be able to give the OR £12.5k
and the house will be safe, also do i have to get a new mortgage in my own name
as i dont earn enough to get a 97k mortgage even though at present im paying all
house bills.

3. IVA for the cards only as a parent can clear the joint £15k loan for us which again
doesnt put me in the IVA equation

we dont know what route to take but it needs to be done soon
User avatar
By TalbotWoods
#350473 Hello and welcome

OK need to know a couple of things first, so that we can makes sure you get there right advice.

Is the business a Limited Company or as a sole trader

Are you BOTH going to enter into the same type of insolvency, such as bankrupt or IVA.

Forget the cards only IVA, as if you settle one big debt off, then they will object to the whole IVA as other creditors will have been treated preferentially.

Individual Equity will be deemed as 140 -20 -97 / 2 = 11.5K

So you will be able to but her individual equity form the OR for 11.5K. However, if the property is goign up in value, the OR has 3 years in which to deal with it, so they can and do hold off for about 2 3/4 years before looking at the equity. So as the secured debt drops, and the value of the property increases, they may be looking for considerably more!

Joint debts will become you sole responsibility, and the second either of you enter into insolvency, any agreement you had will be gone, the creditor will want paying back all at once ( they get a tad nervous the other parties will then enter into insolvency)

As long as the mortgage is paid the mortgage companies are usually OK.

I think you may be getting the hint that an IVA may well be a better option here, but it will depend on income, the circumstances, etc. A F&F IVA with that much equity in property my be rejected, but a normal IVA may well work, so......

At this point I am goign to stop and strongly suggest that IF the business is a sole trader, and NOT limited, she/you/ both of you talk to one of the organisations below.

If it is Limited she must seek advice from Business Debt Line first and they can be contacted at http://www.bdl.org.uk/

The organisations to talk to are:

PayPlan: Is a national organisation with approaching 20 years of experience in dealing with all kinds of financial situations, no matter how bad they are.
Their advice and help starts with a simple phone call to 0800 280 2816

NDL: Is an organisation that advises you on solutions that are available to you, you can contact them on 0808 808 4000

StepChange (formerly CCCS) Is an organisation that advises you on available solutions with your financial problems. You can contact them on 0800 138 1111

I know it can seem bewildering, but with some perseverance things can go your way, and we will be here to help you.

Tim
By karluk29
#350563 Hi

Thank you for the quick response. We did have someone round
To see us last week but he never mentioned that they could wait
2-4years to sell the house.

I would be hoping NOT to go into insolvency because the only thing
That ties me in with her would be the joint 15k loan. Which I can
Get paid off by a parent.

She is a sole trader which is why we are in the process of getting the
Business valued and put on the market.

Would debt management be a way to go? I don't know much about
This but I've been told they freeze your interest and you actually
Pay off the real amount and in that time hopefully she can get them Down and hopefully sell the shop and I can sell my car (10k).

Sorry I'm new to all this what is F&F
User avatar
By TalbotWoods
#350633 Hi Again

OK if she is self employed it effectively makes things a lot lot easier, theoretically if she were to walk away from everything now, putting the whole lot into a bankruptcy pot (including the unsold business), then the whole lot would be gone overnight, all debts gone (except the mortgage and the joint debt).

However, as you appreciate that may not be the solution you want or need.

The house thing is something that the Insolvency Service introduced last year, and we have already found a few people who have not been advised correctly about this, pretty much only if there is significant negative equity or the house is specially adapted for a disabled bankrupt will they go for an early buy back

You have mentioned a DMP (Debt Management Plan), these are very much informal agreements between the creditors and you, they do not however stop or prevent legal action, and you do have property to protect. Some creditors may freeze your interest, and stop applying charges, but many more dont, plus there is no legal obligation for them to do so. Plus a creditor can now legally go to court for a CCJ and walk away with the CCJ and a Charging Order on your house. So please think very carefully about this option, as from what you have posted I do not think it would be the best solution in this instance, and could actually complicate matters more.

F&Fs are Full and Final settlements, these are available, but depend very much on circumstances. There is a right way to do them and a wrong way. The best way is via what is called a Full and Final IVA, but they require a lump sum payment, and there are other considerations that are personal bassed, soooo.....

....what you really need to do now it talk to one or even all of the organisations I have previously listed, as you can be more open and forthcoming about what you say, your finances, your personal circumstances etc. and their services are totally free and confidential (which means they wont sell you details on, or talk to the creditors, etc)

When you have spoken with them, you will as most people do still have a number of questions that you want to ask, please feel free to do so

Tim