Is bankruptcy the right option for me as director of LTD company?

[alongroadahead]

I need to know if bankruptcy is for me and wil try and keep to the facts rather than waffle on..........

 

1. I have a total debt of approx £72,000 the breakdown is:

 

mortgage shortfall debt of approx £60,000

 

Four x Credit cards debts of £500,£2300,£2900 and £5200 (I have been making token payments to each one for about one year)

 

Past utility bills of approx £700 (I pay them a monthly instalements)

 

One court fine of £300 ( i currently pay this in affordable instalements)

 

2.My personal situation is, I have no savings,no assets and in rented accomodation. All i have is a car worth approx £4000.....

 

3.My work situation is I formed a LTD company approx 8 months ago and I am the sole director. (the company is running at a loss at present, well i guess so, even though end of year accounts have not been done yet!)-Basically, i am working for no wage! The company has no debt-I rent the machinary and the premises....

 

4.Shameful to say but I have attempted 2 over-doses because of all this debt (as i knew the mortgage shortfall was in the pipeline and i would be made homeless!) and am currently under phsychiatry programme and improving every day and creating my LTD company is a road to a brighter future.........and i sign of my recovery......

 

I just do not want this debt to dictate my life any more and i need to take the reigns and see what my options are......

 

Ok, i think i have stated all the facts and i hope they are clear....my questions are now:

 

1.Life after bankruptcy-how long does it take to be discharged and will i have to declare i have been BR? Will that prevent me from obtaining a mortgage or credit in the future? will it mean my credit file is "clean" after 6 years?

 

2.During BR, will i still be able to have a basic bank account? how will i be able to rent a property etc? will it not show on a credit check?

 

3.I suspect the mortgage company will force me into BR but they will not gain anything as i have no money or assets! will i have to pay?

 

4.If the mortgage company leave me alone for the time being when they realise i have nothing-would it be advisable to try and offer full & final settlements on the other debts to avoid BR myself? (although i do not have money to do it myself)

 

5.My main worry is my LTD company and the effects of personal BR-how can i keep my company during the BR period? can i make an accountant a director until i am discharged and then be director after i am discharged?

 

Sorry for all the questions but i am just in so much turmoil as to what to do, do i enter into a DMP? BR? F&F offers? Should i avoid BR to avoid the shame and stigma and seek alternative options so that i am not "restricted" during and after BR, I am just so confused..........Any advice is greatly appreciated!

Edited September 26, 2011 by alongroadahead

[rebel11]

Hi along

 

Welcome to CAG

 

The guys will be happy to advise as soon as they are available. (same applies to your other thread)

[toddle2u]

1.Life after bankruptcy-how long does it take to be discharged and will i have to declare i have been BR? Will that prevent me from obtaining a mortgage or credit in the future? will it mean my credit file is "clean" after 6 years?

Unless a bankruptcy restriction order is put in place (unlikely from what you have said) you are automatically discharged after 12 months. However, if it is a simple case it could well sooner. The BR is removed from your credit file after 6 years but you would struggle to get a mortgage for about 3 years. You would be able to get a 'sub-prime' credit card after 12 months with someone like Vanquis

 

2.During BR, will i still be able to have a basic bank account? how will i be able to rent a property etc? will it not show on a credit check? During BR you will be able to get a bank account with Co-Op or Natwest. It will only be a basic one. You may struggle to rent a property or asked for a bigger deposit.

 

3.I suspect the mortgage company will force me into BR but they will not gain anything as i have no money or assets! will i have to pay? If you are made BR even if the mortgage shortfall hasn't been crystallised you can include a provisional amount it in your statement of affairs and therefore won't have to pay.

 

4.If the mortgage company leave me alone for the time being when they realise i have nothing-would it be advisable to try and offer full & final settlements on the other debts to avoid BR myself? (although i do not have money to do it myself) It could be worth a try but remember the mortgage company have 12 years to chase you for the shortfall so you could make the full and final payments and the mortgage company pop up demanding payment and you are back at square one.

 

5.My main worry is my LTD company and the effects of personal BR-how can i keep my company during the BR period? can i make an accountant a director until i am discharged and then be director after i am discharged?

Whilst you are BR you are unable to be a Director of a Ltd Co. I would be very surprised if your accountant would agree to be a Director. You could ask an 'associate' to be a Director whilst you are BR but you should be aware that this is really not a good idea. If you are found to be a shadow Director whilst BR this is a criminal offence as you should not even be involved in the management of a Ltd Co whilst BR.. You could however, operate as a sole trader.

 

You have my sympathies at this difficult time. It is very difficult to advise someone if they should make themselves BR or not as it can really only be their decision. There is no shame or stigma attached to BR anymore as so many people are doing it and you are obvioulsy trying to turn your life around so do not worry about that. If you have any other questions just ask

[alongroadahead]

thank you for clarification. how do i switch to a sole trader, can i keep my same company name and how much will it cost to switch over?

[toddle2u]

In theory it shouldn't cost you anything to switch to a sole trader and yes you could keep the same company name as you would be Joe Bloggs t/a Joe Bloggs Fashion or such. You would need to regsiter with HMRC as a sole trader within 3 months and you can do this online and again does not cost anything. You would need to change who the name of the lease is in and also the rented equipment. It would be best to do this before you are made BR as it could get complicated getting it sorted once you are.

[alongroadahead]

ok, sounds good. what do i do about banking, do i have to open new account? i have a pdq machine to take card payments, do i have to open a new account with them? so, being a sole trader wil not effect me in BR, right? how long does change over take? i was only thinking of doing it and save all the upheaval only if BR is getting close, but guess im facing the inevitable....

[toddle2u]

Yes you will need a new bank account and you could try to get the pdq machine transferred to your name. You can start trading as a sole trader as soon as you like and wind down the ltd company. Whilst BR you cannot obtain credit terms in excess of £500 without telling the person extending credit that you are BR. The more I hear about your situation I would sit tight and wait for it to happen and if you think it's getting close do the switch over then. You would need to do all this before you are made BR as you would find it difficult to get a sole trader bank account and a PDQ machine whilst BR

[debtinfo]

What sort of business is it.

 

Im afraid it is not as simple as switching over now and everything will be ok, it is best in my opinion to run down the ltd company, ie complete any out standing work before the bankruptcy (to make sure you keep a good reputation) and then shut for a short while to provide separation, go bankrupt and then afterwards approach landlord etc to start a new lease and start a new business as a sole trader.

 

you will find it difficult to rent equipments and bank card machines after the bankruptcy and so may have to move to cash, obviously what you do will have a bearing on how viable that is.

 

the reason for all the above is that if you are a sole trader before the bankrupty all the agreements you hav such a s the lease will vest in the bankruptcy and could takes months to be sorted out,

 

by now you are probably starting to get down about all the problems, but dont, it seems to me that the debts you have are not going to be sorted in any sort of reasonable time frame even if you got a full time job and earned decent money, so even with the problems the bankruptcy will cause it brings an end to the debt and will probably work out best in the long run, putting it off just prolongs the problem which could come back to get you later perhaps when you have put all the effort in to make the business work, you just have to be prepared that there will be chalanges but that facing them head on reduces how long they will be problems for you

[alongroadahead]

What sort of business is it.

 

Im afraid it is not as simple as switching over now and everything will be ok, it is best in my opinion to run down the ltd company, ie complete any out standing work before the bankruptcy (to make sure you keep a good reputation) and then shut for a short while to provide separation, go bankrupt and then afterwards approach landlord etc to start a new lease and start a new business as a sole trader.

 

you will find it difficult to rent equipments and bank card machines after the bankruptcy and so may have to move to cash, obviously what you do will have a bearing on how viable that is.

 

the reason for all the above is that if you are a sole trader before the bankrupty all the agreements you hav such a s the lease will vest in the bankruptcy and could takes months to be sorted out,

 

by now you are probably starting to get down about all the problems, but dont, it seems to me that the debts you have are not going to be sorted in any sort of reasonable time frame even if you got a full time job and earned decent money, so even with the problems the bankruptcy will cause it brings an end to the debt and will probably work out best in the long run, putting it off just prolongs the problem which could come back to get you later perhaps when you have put all the effort in to make the business work, you just have to be prepared that there will be chalanges but that facing them head on reduces how long they will be problems for you

 

Thanks for the clarification. You have hit the nail on the head with regards to my mind set, I see it as inevitable and just need to know preparation i need to do in order to end this financial torture and cruelty in the best possible way....I just feel so ashamed at taking the BR route but i just do not see a way forward.....

 

The rental contract is not a problem getting it in my sole name, nor my machinary if i become a sole trader. I am within the cosmetic field and cash payments are not really an option as most clients pay via bank cards! The company does not have any debts or any services to "work off"....Would i have to have a break? I guess I need to know whats best and in what timescale as i do not have a clue.....its all very daunting as i guess i do not want to have the obstacle where my business is effecting within my personal bankruptcy or atleast keep in to a minimum.

 

So without getting in a fuffle, basically i can change the rent agreement and machinary to my sole name, that just leaves the PDQ machine that i need, when do i make the change? will being a sole trader before BR effect my work?

[debtinfo]

the problem is this, if you are a sole trader on the day of the bankruptcy then the OR that gets put in charge of the case will close the business, as all business's cease when you go bankrupt. The OR is not against you making a living but on that day all your contracts, for instance for a lease of a property will become the OR's and whilst there may not be a value to it and it may be abandoned eventually the process is not quick and essentially you would not be able to trade from the premesis whilst that is going on, the landlord would have trouble as well as they would not be able to put you or anyone else back in in the meantime. If the Lease is still in the name of the ltd company then it does not become part of the bankruptcy, but then you have the problem that you cant run the company when you become bankruptcy, so a sort of catch 22, so you need to stop the ltd company trading just before the bankruptcy and then after the bankruptcy you can start again as a sole trader, same with any other agreements you have.

 

Personally i think you are going to really struggle to get a card machine after the bankruptcy, im not sure if anyone else knows of a company that will allow it.

[alongroadahead]

the problem is this, if you are a sole trader on the day of the bankruptcy then the OR that gets put in charge of the case will close the business, as all business's cease when you go bankrupt. The OR is not against you making a living but on that day all your contracts, for instance for a lease of a property will become the OR's and whilst there may not be a value to it and it may be abandoned eventually the process is not quick and essentially you would not be able to trade from the premesis whilst that is going on, the landlord would have trouble as well as they would not be able to put you or anyone else back in in the meantime. If the Lease is still in the name of the ltd company then it does not become part of the bankruptcy, but then you have the problem that you cant run the company when you become bankruptcy, so a sort of catch 22, so you need to stop the ltd company trading just before the bankruptcy and then after the bankruptcy you can start again as a sole trader, same with any other agreements you have.

 

Personally i think you are going to really struggle to get a card machine after the bankruptcy, im not sure if anyone else knows of a company that will allow it.

 

Ok i see. so basically i cannot be a sole trader during BR? So effectively i would have to cease trading the LTD company pre BR then wait one year (assuming that's the timescale) then re-start again, right? If there no other way i can keep working as self-employed?

[debtinfo]

no, you sort of half understand, you cant cant carry the business over from before to after the bankruptcy, but you can start a "new" business during bankruptcy, so the day after the bankruptcy order you could start the new business

[alongroadahead]

ok, i was confused, so is it not best to close LTD company pre BR, set-up as sole trader and get PDQ machine account etc all set up as sole trader as i wouldnt have the added problem of declaring BR as i wouldnt be at the stage of setting up again? i can trade as sole trader while BR, right?

[debtinfo]

no because if you start before the bankruptcy, then when you get to the bankruptcy day, they will close it down and take everything away. you cant carry the business over that threshold of the bankruptcy day

[alongroadahead]

so i can be sole trader anytime during BR? i still want to keep working, so what gap should i leave between closing LTD co and setting up day after BR, can it be weeks, rather than months?

[debtinfo]

yes you can trade during the bankruptcy, as i said above the OR doesnot want to stop you earning a living its just they have to deal legaly with what is in existance on the day of the bankruptcy order.

 

In theory, you can stop the ltd company one day and start as a sole trader the next day, i only recomend leaving a small gap so that you can finish of any previous work in the LTD company and wind down so that a) you satisfy customers to keep a good reputation 2) you can show a legal gap that you really have ceased trading the ltd company and started a new sole trading business, remember it is an offence to carry on being the director so any one looking back can clearly see you stopped being the the director when you were meant to and clearly started a new business. Also for the tax man you need to do the paperwork to start a new sole trader business and clearly show when it starts and so when you tax is counted from

[alongroadahead]

ok thats clear now, thank you. as i understand, to wind a company up, i have to cease trading for 3 months,so could i say for example bankruptcy day was 1st dec, could i cease trading of limited company 1st nov, lie low for one month, wait for bankruptcy day to pass then set up as sole trader on 2nd dec? meaning, can i still be in the process of winding up a LTD Co and set up as sole trader at the same time? when is 'bankruptcy day', the day i submit my forms or will a date be given to me? sorry for my lack of knowledge and so many questions, i just want an end to this torture....

Edited September 26, 2011 by alongroadahead

[toddle2u]

Can't disagree with any of the advice that debtinfo has offered.

 

Does the Ltd company hold any stock or have any assets? If you are renting machinery I guess that there is an element of stock, if so how much?

[alongroadahead]

i think i have give debt info migraine with my lack of knowledge but its alot clearer now.

 

No stock or assets, no loans or debts. just one machine that has 5 months rental remaining!

[toddle2u]

You have stated that being BR should present no problem getting the lease of the premises and machinery transferred so that is sorted. However, I still do not see how you are going to be able to get a PDQ machine when you are an undicharged bankrupt. I just can't see it. Is there another Director of the Company? Who is the Company Secretary? Are their any managers in the company or is it just you?

[alongroadahead]

i agree! the PDQ is my problem. its just solely me.

[debtinfo]

ok thats clear now, thank you. as i understand, to wind a company up, i have to cease trading for 3 months,so could i say for example bankruptcy day was 1st dec, could i cease trading of limited company 1st nov, lie low for one month, wait for bankruptcy day to pass then set up as sole trader on 2nd dec? meaning, can i still be in the process of winding up a LTD Co and set up as sole trader at the same time? when is 'bankruptcy day', the day i submit my forms or will a date be given to me? sorry for my lack of knowledge and so many questions, i just want an end to this torture....

 

yes the hypothetical dates you give would be fine, Bankruptcy day is the day you go to the court, the judge makes the order with the date and time on it and that is the moment you are officially bankrupt

[alongroadahead]

upon further thought,ideally i would just prefer to keep it LTD and just appoint a director during my bankruptcy as i think the PDQ situ is going to be awkward! i dont nor want to ask family or friends, so can i pay an accountant a fee to do this? (i read on some other persons thread that its possible, any thoughts on this?). wil the OR allow the LTD company to trade during BR?

[debtinfo]

The problem with that is that it does not just say that you cant be the director, it says that you cant be involved in the formation, promotion or manageent of any ltd company. That means you cant have any influence at all in the direction of the company

[alongroadahead]

oh dear, thats not good then! so, its back to the PDQ situation again....not sure what i can do?

 

maybe if i had no choice i would have to pay higher fee's and maybe use paypal? or would i be able to use the old fashioned card impression machines? then if i can prove to a merchant service and build up a good credit file again? what do u think? once i solve the card payment scenario i can start making decisions to ease this debt nightmare that has caused me so much pain....

Edited September 27, 2011 by alongroadahead