Insolvent business

[breakaway]

Hi

I have run my own business for 4 and a half years now but sadly, having made it through the worst of the recession, I am now at the point where i have no option but to consider creditors liquidation.

I unfortunately have a personal guarantee in the form of a second charge against my house, for the business loan i took out so i will need to sell my house this summer to repay the bank.

However, I am wondering what, if any benefits, I will be able to claim when the business closes? I have never claimed Benefits before (apart from child tax credit and working tax credit) as i have always been employed but obviously i will have no income until i find alternative employment so i assume i will no longer be entitled to working tax credit. Will i be considered to have made myself unemployed by winding up the company?

I am hoping to get the bank to agree to me making interest only payments on the loan until the house is sold (all payments up to date so far, no defaults or late payments) but am trying to get a handle on what income, if any, i'm going to have

Thanks for your help

[Nystagmite]

There's a 4 weeks run-on with tax credits. Do you have a partner who works? Do you have any savings above £6000

[breakaway]

Thanks for the speedy reply

 

I'm a single parent although my youngest child is 18 (hence my financial crisis - child tax credits and maintenance payments both ceased). I cashed in the endowments on my mortgage and have been living on them for the last 2 years so in effect i now have an interest only mortgage but it does mean i have around £9 000 in my bank account. I did claim some council tax benefit last year but it became so complicated that i've cancelled my claim because i ended up with an overpayment and had to pay £250 in March. The repayments for the business loan will be around £1500 per month if i have to keep on making them (if the bank won't let me pay interest only until i sell the house) and that's before i have all my other outgoings - mortgage, bills etc so the £9k isn't going to last me very long.

 

I have spoken with an insolvency practictioner and i anticipate the business will be closed down by the middle of June

[Beck1968]

Are you an LTD Company and who are your main creditors

[breakaway]

Hi Beck

Yes, I am a limited company. I'm simply not turning over enough to pay all my overheads now. I've been robbing Peter to pay Paul for a few months. I haven't drawn a salary from the business for over a year now, i've been living on my tax credits and maintenance payments (which have now stopped), in the hope that i could get through the recession and business would pick up. But i'm now beginning to see that even it does its probably too little too late. I'm behind with my rates and utilities and i can't afford to pay my rent this month. My next VAT bill is due in June and i can't see how i'm going to be able to pay that either

I try not to feel bitter about it but i do begrudge the fact that i have worked and paid tax and NI for 25 years and now the government take 20% of the income my business generates even though i take no money myself and i'm not entitled to any financial assistance. Sadly, i will be better off winding up the business, the implications of which are that all my staff lose their jobs and other businesses i work with also suffer financial hardship - its totally crazy

[Beck1968]

I do understand the stress you must be under right now,

 

Being LTD means a Creditors Voluntary Liquidation is going to cost above £ 2500 (somtimes paid in advance or from the sale of business assets on Liquidation)

as for the staff you have working for you, if you cannot pay the staff wages make them redundant immediately as it is unfair on both sides (these are the people you are likley to meet in the supermarket)

 

now when a Liquidator takes control of the business they will try to sell the assets as soon as possible (this only adds to the cost of Liquidation fees and somtimes the assets are not sold for true market value)

 

my advice would be to hold off on the Liquidation for a while and do the job for them yourself, make the staff redundant, re-stock what you can with suppliers - sell what ever is left yourself, leave the rental property and relocate the business address to your home for contact by mail purposes, this will give you some breathing room and reduce possible Liquidation costs

 

as to the 9K you have in the bank (personal account, i hope) think about "the right of set off" clause that the banks have

 

your main problem is the personal guarantee, as you have said selling your home is maybe the only way (but you do have time to maneuver while they are chasing for payments) hopefully you could find a job and keep your home if there is plenty of equity in the house

 

now life is full of choices,

 

do you Liquidate or wait to be Liquidated (both have good and bad merits based on cost)

sell the house or wait to be repossessed (both have good and bad merits dependant on the equity in the house and current house rental prices)

 

Chin up, Best Foot Foward and all that.......

[breakaway]

Hi Beck

 

Thanks for your very detailed support and advice. I have been struggling for sometime now and have made it my business to make myself as informed and prepared as i can possibly be so that when the worst happens - which i fear it will - i will be able to remain in control.

 

I know that i can avoid the costs of an IP by 'doing it myself'. However, my business is very complicated. I rent a large facility, I lease a large amount of specialist equipment, I have several hundred people paying me monthly direct debits and i have employed staff, freelance staff and other people who use parts of my facilities under licence for their own business purposes. So, closing down is going to have implications for lots of people and cause many ripples. Given the size of my liability with the personal guarantee, another £3k hardly seems to make much difference and will at least go some way towards helping me to know i am doing things 'right'. I have every intention of ensuring my staff receive the money they are owed. Unfortunately, because of the nature of the business (we are open 15 hours day, and 7 days a week), it is not practical to make the staff redundant until the day the business closes down. There are no assets to sell really - everything is leased. Just a few bits and pieces which wouldn't raise more than a few hundred pounds

 

My personal account is with a different bank from all my business finances (i was advised to do this from the outset). I want to sell my house anyway. My youngest is going to university in the autumn and the house is too big for me to keep going. I am, I believe, as prepared as i can be. My main concern is that i will have to find so much money on a monthly basis to keep up the loan repayments and live between now and when i manage to sell the house. I really don't want to default on the loan because then it will start to get bigger with charges and interest payments etc and as i have equity in the house I don't want the debt to the bank to grow.

 

One of the things i really want to know is whether i'll be entitled to claim any benefits. I have a mortgage so obviously i can't get housing benefit; i will get a 25% reduction on my council tax when my daughter goes off to college in September, but am i entitled to JSA? Have i made myself voluntarily unemployed by winding up my business? Also, i haven't taken a salary for the last 15 months so have paid no tax or NI. Hopefully i will get a job but in the meantime i need to know what i am facing