Friend lent money

[Orchid47]

Just after some advice please.

 

An old friend very kindly lent my business 2K, (otherwise I would have had to shut down) but I havent been able to repay it in the timescale I had hoped and now she is threatening me with legal action

 

Please can I ask a few questions to see how best to deal with this

 

1. The loan was for my business and paid into business account

2. Ltd Company

3. I've no assets, and owe money to Landlord (who is ok with debt at the moment. I keep him updated and pay him when I can)

4. I do owe British Gas about 3K - although this is in dispute at the moment

5. I didnt want things to become nasty with friend, and can see that I'm at fault in not being able to pay back in the timescale I'd hoped but business has suffered in Recession and I didnt expect us to go into another Recession. I'd hoped we'd be out of it by now.

6. Ive explained situation to friend but she is fed-up and want money back now or will go down legal route.

7. I am unable to get any finance/loans other than work coming in as I've screwed up my credit file trying to keep buisness going - which I have for the last four years of the Recession, so really dont want to give it up now!

 

Please can someone advise me of best options?

 

If I get taken to court, although I have no assets with business, can they close me down?

 

Friend says she will accept monthly payments but I cant guarantee these and also she wants them at a high rate every month to clear it quickly.

 

I dont draw a salary as I dont have enough spare money to do this, and before you ask I havent been on holiday for the last 5 years!

[citizenB]

Ouch, this is the quickest way to end a friendship. I am not sure what you can do. Sadly, if your friend issues a Statutory demand, then yes you could be made bankrupt if you are unable to pay your bills.

 

I will try and find someone who might be able to think of something else.

[Orchid47]

Hi Citizen

Thanks for this.

Fortunately the friendship was more of an acquaintance, so not worried about this bit too much, but still didnt really want things to get nasty.

I also suppose this could work against me as well because she wont have any worries about Bankrupting me though.

Have you had any luck your end with anyone that may be able to help?

[Surfer01]

If she bankrupts you chances are she will not get the full amount back anyway, however all the other debts will disappear. Maybe not such a bad thing if you are in a lot of debt with no way forward. Not the best thing to happen, but ..................

[cerberusalert]

What is to prevent you from winding the Ltd company up? Any debts owed by the company are not your personal liabilty that is the point of Limited Liability status... unless of course you acted as a personal guarantor.

 

http://www.companieshouse.gov.uk/infoAndGuide/windingUpCompany.shtml

[Orchid47]

Yes my premesis are personally guaranteed so this isnt the best option to either wind it up or go bankrupt. As I said I owe my landlord but he has been very supportive over the last 5 years so I would really not like to stitch him up. I've also worked so hard to maintain things during this recession so to take this way out would mean I loose my house because of the guarantee I made for the premesis.

I dont want to go down this route.

[andydd]

Well firstly, what was the arrangement between tyou and your friend ?. Was there a contract ?. Did it mention dates to repay the debt ?

 

Obvioulsy if there was no written contract then nothing maybe repayable as it may be difficult to prove.

 

Andy

[Surfer01]

More importantly, do they have a credit licence and are they registered as a lender?

[Orchid47]

no she does not have a credit licence and no she is not an official lender. This was an aquaintance lending me money. I think I may have signed to say I received it but there was no Contract drawn up with any clauses and T's & C's.

She has emailed me asking me to pay but I've not replied so that I'm not admitting to anything just incase she cant find the letter I signed.

[andydd]

It would appear she doesnt have much hope at court then as even if there was something signed if it doesnt have any T&C's or mention when the money is to be paid back then you could simply say..yes I borrowed it and it will be paid back in the future.

 

Clearly the sensible thing would of been for the 'contract' to say 'to be paid back on demand' or something similar.

 

I assume you don't have a copy of the 'contract' ?

 

Andy

[Toque]

Even if there are no T&C's stating a repayment timescale, the Court could impose them. A promise of repayment that extends indefinately into the future is unlikely to be regarded as reasonable.

 

Note that if the friend gets wind of the fact that the business is effectively bust, she might apply for a winding up order. It might therefore be wise to pay her something, no matter how little, on a regular basis.

[BRIGADIER2JCS]

As it is this boils down to ''a debt of honour'' a loan from a friend, obviously no agreement set out in writting and signed by both parties, no one could expect this loan to be covered by CCA 1974 or for the lender to have a consumer credit licence, negotiation on a sensible basis is the best way to reach resultion.

[Surfer01]

Even if there are no T&C's stating a repayment timescale, the Court could impose them. A promise of repayment that extends indefinately into the future is unlikely to be regarded as reasonable.

 

Note that if the friend gets wind of the fact that the business is effectively bust, she might apply for a winding up order. It might therefore be wise to pay her something, no matter how little, on a regular basis.

 

How can they do that if there is no proof of debt?

[BRIGADIER2JCS]

This is a private loan so there is no basis for Ts & Cs etc., a simple money claim would most likely result in a forthwith order.

[smithy70]

I do tend to agree with the Brigadier. Providing there is some proof that she lent you the money as opposed to gifted it to you, she will be able to make a legitimate claim. I do think the questions of CCL's etc are just silly and misleading.

[Orchid47]

Please can you advise me? All has been quiet until this week. I've now been told by this person to expect a CCJ to arrive for me this week!!

 

So, lots of questions to ask?

 

The loan if proved, was a business loan.

 

What are the implications of a CCJ with a business?

 

The business is Ltd with no assets, apart from a very old Computer.

 

I am still trading and working, although do not earn enough to draw a salary from the business since the recession hit!!

[BRIGADIER2JCS]

It now down to wating to see the particulars of the claim, you can do nothing until then.

[cerberusalert]

It's certainly not a CCJ on it's way, it's the court papers before any judgment.

 

As the Brig says, it's a matter of waiting to see the POC, but it will be interesting to see whether the claim is in yours or the company's name & what the claim is.

[Orchid47]

The claim should definately be in the Companies name, and I know I'm worrying unnecessarily until it arrives, but please can you give me a rough idea as to what it means for a business to have a CCJ. Do I have to close it down? I cant pay back the monies all at once if they are proved. Do they have the right to send in the baliffs?

[BRIGADIER2JCS]

As you say there are other creditors who need paying, they all could seek a winding up order.

If the CCJ is granted and you fail to meet the Judgement Order yes the creditor could apply for a warrant of execution and bailiffs could be instructed.

[Orchid47]

Sorry, can I ask what me the Judgement means?

[cerberusalert]

If a CCJ is obtained against you/business that is the 'judgment'.

 

If it's against the company you have limited liabilty & only the company's assets can be taken into consideration.

[Desperate Daniella]

Has she by any chance sent you a Letter Before Action? Did she actually say a "CCJ" was on its way?

[Orchid47]

She left a telephone message to tell me to expect it

[citizenB]

All she has done by the sounds of things is issued a claim via Northampton bulk centre or your local court. The minute you receive it, let us know.

 

We will want to know.. what she is claiming for - called the particulars of claim - and the issue date so we can keep on top of the timing for you.

 

If it is issued out of a local court then you should at the very least to expect al the supporting documents attached to the claim. If out of Northampton Bulk centre, then you will have to send a CPR request for information.

 

We will cross that bridge when it is arrived at. Just let us know if and when the claim arrives.