Family Business Loan - Signed Promissory Note - SD Failed - Now a Claimform

[rippedoff15]

Well had a very strange and interesting call today from a mediator who has been asked to call in relation to completing a solution,

 

 

he was fully aware of my bankruptcy,

but as my wife signed a promissory note

this means she is now responsible for the debt.

 

 

I explained she is unable to clear the debt in full and unable to take out any loans,

and in fact she already has a £40k mortgage shortfall on her credit file.

 

I did confirm if they [the other party] start court action my wife would file for bankruptcy

and in real terms that would be the best option

and bring an end to this issue,

 

 

he then said the other party would try the get in place a court order stopping any future funds being paid to my wife as she is in her mothers will.

 

 

Not sure if they could do such an order can be arranged and what will happen if she filed for bankruptcy which would clear all the debts.

 

The main question is would the bankruptcy order clear all the debts and if she got funds in a will in 5 years or more would be bankruptcy / IP get her inheritance.

 

Thanks for helping

[steampowered]

Does the promissory note say that it was signed as a deed and was it witnessed? If unsure, you should request a copy of it.

 

I am sure your wife is already aware that it was extremely foolish to sign this document. Giving in to them by signing things won't help release the pressure; it will only increase it. If it was signed as a deed, then yes your wife should consider filing for bankruptcy (but should make sure she understands all the implications of this).

 

If it was not signed as a deed then it is not enforceable for what is called lack of consideration and no further action needs to be taken.

 

The other party can't get a court order stopping future funds being paid to the wife. A bankruptcy is normally discharged after 12 months.

[rippedoff15]

We understand now signing the note was completely wrong,

however at the time it seemed the right thing to do,

however this is the wording in the note:

 

As of 1st August 2009 we, Mr & Mrs both of address

jointly and severally promise to pay ( their names ) both of their address on demand the sum of £21,114.00 with interest at the rate of 8% per annum.

 

We further promise that we will keep regularly updated as to any changes in our financial circumstances between the date hereof and payment of said sum with interest as hereinbefore provide for.

 

signed and witnessed

 

Any thoughts regarding this note ?

[rippedoff15]

Well had a call today from the mediation guy,

asking for my employment details and my wife's,

I have refused and again explained our financial issues.

 

He has confirmed they have looked into our financial records,

and has stated if the other party start court action my wife will be issued a statutory demand by the court, and if she can not pay she will be made bankrupt.

 

 

Is his statement correct

or should we file our bankruptcy papers now to save time.

 

 

Not sure what we should do now also should we stop the monthly payment ?

Or keep paying until we have had the bankruptcy hearing

[reallymadwoman]

I strongly suspect that this mediator is actually a solicitor acting for your relatives. A mediator would have no means nor desire to look into your financial affairs, they don't advise either side, they just try to organise a solution.

 

As steampowered suggested, the note may not even be enforceable, and if it is, why haven't the other party started court action already rather than just keep putting pressure on you with threats of bankruptcy. And what would they gain if they did make your wife bankrupt? You should also bear in mind that it is very expensive to make someone bankrupt.

 

I would do absolutely nothing for now. If and when they do start proceedings is the time to do something. Why pay for bankruptcy yourselves if they have volunteered to pay for it?

[rippedoff15]

Hi,

He said he was requested by the other parties solicitor to act as the mediator,

we pointed out to him that we had no assets and clearly unable to clear the full amount,

therefore we have offered to repay the same amount of £125.00 but no more,

he said he will speak to the solicitor regarding the matter.

 

 

If the other party file court action for bankruptcy this has little impact with my wife has no assets nor do i myself,

i explained if they file we cannot make any payments as the debt is within the bankruptcy.

 

However should we still keep paying the £125.00 monthly payment or stop,

if we keep paying and they start court action it shows we are trying to repay the debt.

 

 

now if we get court papers,

will my wife have to attend court as its too upsetting

or can she accept the bankruptcy court order,

and can they charge their fees ?

 

 

What would happen if she refused to attend court.

 

Thanks

[steampowered]

Does the note say anywhere that it is executed as a deed? This is crucially important.

 

 

This mediator doesn't sound impartial so dealing with him or her is probably a waste of time.

 

 

I think it is foolish for you to be making monthly payments. What is the point? If you have already decided that you cannot afford to pay this debt then monthly payments is simply throwing money down the drain.

 

 

I think you need to take action to finally resolve this. I suggest you stop making any payments immediately. You should write to the creditor explaining that you do not believe any debt is owed and will not be making any payments accordingly. You should state that they may proceed to issue a claim against you and/or your wife in the county courts if they think a debt is legally due. You should state that all communications must be kept in writing and that you will not entertain telephone discussions. You should also explain that use of a statutory demand is inappropriate when a debt is disputed, and if an SD is issued you will simply apply for it to be set aside which will result in you being awarded costs.

 

 

This is an aggressive strategy but I do not see any alternative. Otherwise this will simply drag on. Are you prepared to keep throwing money down the drain? Are you prepared to let the family keep bullying you for years and years over a debt you can't repay, with no resolution in site? You need to get this into a court room so that the dispute can be decided and so that you can get official confirmation whether or not any debt is owed. If it turns out that a debt is owed for whatever reason, then at least you will know and you may then proceed down the bankruptcy route to get it over with.

[steampowered]

if we keep paying and they start court action it shows we are trying to repay the debt. how if we get court papers, will my wife have to attend court as its to upsetting or can she accept the bankruptcy court order, and can they charge their fees ? What would happen if she refused to attend court.

The court won't care whether you are trying to repay or not. The court will only decide whether or not a debt is legally due. I really don't see any benefit in making payments once you have accepted the principle that you cannot afford the debt.

 

 

Yes, your wife will probably have to attend to court. She won't have to say very much. The civil courts are not like the criminal courts you see on TV - it will simply be a small room in your local county court with the claimant and the judge. Each side will explain their case to the judge, and the judge will then make a decision.

 

 

It is not too upsetting. Anyone can handle it. You could even save the monthly payments you would have otherwise made and use them to employ a solicitor or barrister to attend the hearing on your wife's behalf. Even if you self-represent I think a court hearing would be much less stressful than the alternative, which is to let this bullying persist for years and years.

 

 

A bankruptcy would be equally stressful, since your wife would be required to attend hearings with the official receiver.

[rippedoff15]

Hi,

 

Just to confirm the full wording of the note we both signed and witnessed is in post #28,

it has no wording executed as a deed? ,

 

 

as it has no DEED wording is it legal ? in post #28 is the full wording.

 

 

I feel like challenging their claim and let the courts beside on their claims

 

 

Thanks

[steampowered]

Hi,

 

Just to confirm the the full wording of the note we both signed and witnessed is in post #28, it has no wording executed as a deed? , as it has no DEED wording is it legal ? in post #28 is the full wording. I feel like challenging their claim and let the courts beside on their claims

 

Thanks

Hi

 

As the promissory note does not state it was signed as a deed, in my view it is not legally enforceable.

 

In order to have a legally enforceable contract, there must be what is known as "consideration". This means there must be an "exchange" - in other words, your wife would need to received something of value as part of an exchange in order for her promise to pay money to be legally valid. My understanding is that your wife did not receive anything in exchange for signing the promissory note and hence the promissory note is legally enforceable as a contract. You may read http://en.wikipedia.org/wiki/Consideration_in_English_law to confirm this.

 

The only exception to the above rule is where you have a document which is signed as a deed. A deed does not require consideration. One of the requirements to have a valid deed is that the document must clearly state that it is a deed. If it does not state this then it is not a deed.

 

In a sense, this is a technicality. But it is a fundamental technicality and has been a rule of English law since the 1400s - the courts don't enforce contracts like promissory notes unless both sides have exchanged something. Any first year law student could tell you the same thing. I don't think a judge would have much sympathy for them on this given that they pressured your wife into signing it.

 

I hope this helps. Let us know if you want help with the letter.

[steampowered]

I think the letter should be something like as follows. You need to customise to fit your circumstances. If they have a solicitor acting for them on the debt, the letter should go to their solicitor. If the solicitor is just a family solicitor but not actually instructed on the debt, then it should go to the other party.

 

It wouldn't be a bad idea to get yourself down to a local law clinic or the CAB, or perhaps speak to a solicitor, if you are unsure.

 

--

 

Dear Sir/Madam

 

I refer to your client's statement dated xxx in relation to the amount of xxx. I do not accept that any money is owed to you by me or my wife.

 

As you are aware, you made a business loan to my company called xxx. Funds were received by the company and not by me personally. I personally regret that my business was not successful and that it was not able to repay the loan. However, I do not consider myself to be personally liable as I did not give any guarantee for the company's debt.

 

Please note that I was declared bankrupt on xxx. Since the debt predated my bankruptcy I cannot now be held liable for it. Following my bankruptcy and illness I am not in a financial position to make any payments to you in any event.

 

I understand that my wife was pressured into signing a document labelled 'promissory note'. As you are aware my wife did not have any involvement with the above debt and cannot be considered liable for it in any way. My wife did not receive any consideration for signing the promissory note and accordingly it is not legally enforceable against her.

 

For the reasons set out above I will not be making any further payments towards the alleged debt. If your client wishes to take this matter further, I suggest that he/she begins a claim against me through the county courts so that the claim can be properly adjudicated. I will defend any claim based on the reasons set out above.

 

I understand from a mediator that your client may be considering issuing a statutory demand against me. As I am sure you are aware, use of a statutory demand is not appropriate where a debt is disputed. If a statutory demand is issued against me or my wife before a county court determination has been made, I will apply for it to be set aside and will seek an order that your client pays costs on an indemnity basis in the usual way.

 

Please direct any future correspondence to me in writing.

[rippedoff15]

Well had another call from the mediation guy today,

now he has request we pay £200.00 month and has confirmed the other party will be starting action.

 

 

He stated they will get a high court sheriff to collect the funds every month and if we refuse they will take goods from our home.

 

Can they do this ?

We have finished the bankruptcy paperwork and filing ASAP to finally bring an end to this nightmare.

 

Could they instruct a sheriff,

and if so any timescales as we want to move quickly in applying for the bankruptcy to avoid a visit from a sheriff.

 

Or is the mediator wrong in claiming a sheriff can be asked to visit,

would we get a court letter first before a sheriff visit.

 

Also when the bankruptcy is filed is that the end ?

 

Sorry the panicking just stressed about sheriff visit threats

[steampowered]

As above, you should not be talking to them on the phone. Simply state that you will only deal in writing and put the phone down.

 

They can't instruct a high court sheriff unless they have a county court judgment against you. The process works like this: first you would receive a claim form from the court; then you would then have 14 days to file an acknowledgement of service; then you would then have a further 14 days to file a Defence; then each party would have to provide the documents they want to rely on in court; then there would be a hearing at your local county court; and at that hearing the judge would decide whether or not there is a legally binding debt.

 

I don't think you should file for bankruptcy yet given the severe doubts about the validity of this debt. I think you should be forcing them to go through the proper court process first. If you win in court, that's great. If you lose in court, then you can file the bankruptcy papers the next day.

 

The disadvantage of going to court is that, if you lose, the court fees and their legal costs will be added to the debt. However this doesn't really make much difference if you would be declaring bankruptcy anyway.

 

I think you will find that a fee of just over 700quid is required to declare bankruptcy.

[rippedoff15]

Well managed to get the bankruptcy fees together,

so we are thinking of letting the other party issue courts papers and see if we win or lose and if we lose then file for bankruptcy.

 

 

And add legal fees in the bankruptcy,

and the other party would have to pay their own fees.

 

 

Lets see what happens in the next days / weeks,

i have ready got all the bankruptcy paperwork ready and after speaking to the court we can get a date within days.

[steampowered]

That sounds sensible. You should probably write to the other side letting them know that you will not be paying anything further as you do not believe that there is a legally binding debt, and that they will need to issue court proceedings if they disagree.

[rippedoff15]

Well just started to write a letter and the mediator called again,

changed his tune now and will not speak to me only my wife as its her debt.

 

 

I only took the call as it was private number so had no choice.

He did say he would report back to the other party and recommend what action to take therefore he`s not just the mediator.

 

We have got all the bankruptcy paperwork ready to submit and managed to save the money, but are are thinking of waiting just to see if the start court action.

 

But is it with all the hassle as we will in the end file for bankruptcy.

[steampowered]

But is it with all the hassle as we will in the end file for bankruptcy.

As previously advised, when called by this person you should simply say that you are only prepared to deal with them in writing and should put the phone down. If this gets to court you will want to have a proper paper trail.

 

As previously advised, this 'debt' is unlikely to be legally binding on your wife because the promissory note was not executed as a deed. Why would your wife end up declaring bankruptcy anyway?

 

If they are now taking the view that only your wife is liable, then there would be no need for you to declare bankruptcy in any event.

 

It is absolutely worth the hassle. Attending a short hearing at your closest county court to explain the situation to a judge is frankly not difficult (and probably less difficult than dealing with the Official Receiver on bankruptcy). Your wife has got to get a grip here.

[rippedoff15]

Well I have written and told the mediator they must confirm everything in writing,

when I asked who employed him he said the other party directly,,

and his report would be passed to the other party's solicitor,

 

 

surprise surprise the solicitor who wrote is also the solicitor on the mediators own web site.

He got very rude and said they would start court action straight away.

 

Not panicking at all as my wife has a bankruptcy hearing in 2 weeks maybe sooner, and the debt is included.

I bet the court papers are hear within the next few days then we have 14 days to file a reply and by then my wife will have had her hearing.

 

Bankruptcy is the best way forward as she also has a mortgage shortfall of £40k.

So its needed to clear everything and start a fresh.

[steampowered]

I doubt it would have been worth declaring bankruptcy just over this debt given that you can defend it in court, but if there is a 40k mortgage shortfall as well then I guess you might as well go ahead.

[rippedoff15]

Yet another twist,

we have had a letter from the other parties solicitor today stating we refused meditation,

therefore unless we repay the debt in 7 days from the dated letter 12th Feb they will start court action.

 

 

I have written explaining that the debt is not mine nor my wife,

My wife's bankruptcy hearing is due on 2nd March 2015,

however if the funds were loaned and paid to the business which closed in 2008 and my bankruptcy was 2009, what date would this debt be classed 2008 or 2009 or when we paid the last payment ?

[rippedoff15]

The whole issue is a complete pain,

my own bankruptcy is due to be removed from my credit file and its been hard 6 years,

 

 

my wife's not worried now about her bankruptcy,

however this issue is causing more upset and they keep saying its both our debt,

they refuse to accept we can not pay but they have said they intend to ruin our life.

[rippedoff15]

Going to keep the letter short just to say the facts,

I have also found out the other party arranged the Mediator who turned out to be a solicitor and his web site also confirms he works with the solicitor they have appointed.

 

Clearly not a Mediator who listens to both sides,

turned out to be one sided and if it went to court i will happy confirm this information in court.

I am sending all our letter by Royal Mail special delivery as proof we are replying in relation to this matter.

 

They have stated they want in writing an offer to repay in 7 days if not court action starts and they will add all the court costs and fees, SO WHAT AS I AM BROKE WITH NO ASSETS.

 

Even if it went to court and lost what could they do as i have no assets only 12 year old car

[steampowered]

Even if it went to court and lost what could they do as i have no assets only 12 year old car

 

Two things could happen in court. You could win, in which case it would all be over. Or you could lose in which case the best route might be to go for another bankruptcy (I think that if your car is 12-years old you should be able to keep it either way).

 

It is very hard for me to see how they could possibly be successful in court if the original debt pre-dated your bankruptcy. This is something I would mention to their solicitor if you haven't already.

[rippedoff15]

Well its been over a week since we wrote and i know they had the letter as we sent it recorded.

And yet they have so far not replied nor acknowledged our letter we are very concerned that they have not replied,

 

 

if they start court action how can we check

are there any websites listing up and coming courts action cases,

as sitting waiting for a letter of action is now stressing us both out.

 

 

We were told if it went to court and lost they can instruct a high court sheriff to collect on the same day,

and if we did not pay they can take our belongings even the 12 year old car this this correct ??????

 

Any feedback would be great

[SabreSheep]

No news is good news.

 

*IF* they issue court proceedings the COURT will send you the claim form in the post asking you to accept, acknowledge and/or defend the claim. IF that arrives (And it will be from Northampton Bulk Court) then repost here as soon as it arrives and do not take any action untill you recieve advice and understand what you are doing.

 

I think you are looking at this all wrong. From the strength of advice being offered here you should be HOPING they take court action in order to get this sorted once and for all.

 

At this point I would say win win situation.

1) They do not reply with anything except mere threats etc - You win

2) They do not reply at all - You win

3) They issuce court papers - You win as if they do you will defend the claim, and then only IF the judge says that the debt is owed, you can then review the bankcrupcy.

 

to make this very simple for you

 

THE DEBT IS NOT OWED UNLESS THE JUDGE SAYS IT IS!!!!

 

I expect to get money from you they will threaten to take your first born son as well.

 

Just to confirm for those offering advice, is this a case where the claim will be issued against you in Scotland?