Small Business Debt

[ray_a]

Hi Ellie let;s hope they back off a bit!

It would be much more sensible for them to wait and they do change tack if you mention bankruptcy as they then realise that they won't get anything!

[Soulgrowth]

There seems to be lots of small businesses closing down in our locality also Ellie ... I am sure that we must be on the verge of a recession?

Debbie

www.familyceremonies.co.uk

www.soulgrowth.co.uk

[ellie 553]

yep seems that way according to those of us on the front line - ie taxi drivers / restaurant owners / hotel owners seems to be the way it is going right now

[ellie 553]

*LATEST*
Ok so today we heard that the buyers of the restaurant are pulling out...but the house sale should go through on the 7th Feb. This leaves us with around £6000 in the bank, but still owing the Vat £19,000, PAYE of around £8000 plus tax of £5000. There are also some personal unsecured loans of £17000 plus the DTI small firms loan guarantee scheme loan of £99,000.
We will have paid off the mortgage, secured business loan and overdraft though. At this point I think an IVA for the debts remaining would be the best solution - or it would be bankruptcy. I have heard on here that HMRC are sympathetic to IVAs but advised elsewhere that they arent. I wish we could get some proper advice but cant afford it either! I have til the end of this month at most to make a decision...
In the meantime my partner & I have decided to seperate and I have found myself a rental house for me & the children so wont be able to work so much on the business as they will need me at home. it is really up to me to sort this out as he is unable to at the moment. Any help gratefully received !

[MelanieGiles]

I can assure you ellie that in my experience, and my firm specialises in self-employed cases, that we always find HMRC sympathetic if you have attempted to comply properly with your tax affairs.

Whether an IVA is an option for you I suppose depends on how this would be funded. What are your plans in this regard?

So sorry to hear that you and your partner have decided to separate. It is often an unfortunate repercussion of being in debt, but maybe you can work things out eventually if you can get the debts sorted.

Most IP's will give you advice on a free of charge basis - and yes I know that you are remotely situated, but could you see your way to getting to an IP's office in your vicinity as a face to face meeting would be very valuable.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[ellie 553]

Hi Melanie & thanks for the reply. I think the IVA could be funded by the income from the business as our outgoings will be reduced by around £1300 per month by the sale of the house, plus the end of our equipment finance loan (they are offering us another one !)
It really would be a short term option as we are still hoping for a sale on the business - say 6 months at most We would just have to get on with running the business as best we can til it gets sold even though we arent going to be living together. I have to sort HMRC out as I last told them the sale was going through at he end of Jan. We could make it to Plymouth for a meeting and its so quiet at the moment that closing for a day is really no bother. I will try & call tomorrow and arrange an appontment

[ellie 553]

*2nd update* so made the phone call this morning & seemed to best advise that bankruptcy is the best option now. I have not got a problem with this as am resigned to more important things in life & I cant really justify carrying on the business & accruing more debts when the future cashflow situation is so deperatly unstable (eg - we took £150 today & last yr same day took £550)
My main problem is - I have recently paid a family debt of £10,000. How will this affect my bankruptcy as I am now worried that I will get into trouble for giving preferential treatment

[MelanieGiles]

That will undoubtedly be viewed as a preference by the Trustee who will no doubt look to recover this and distrubute the funds evenly amongst the creditors. What was the motivation to do this, at a time when you recognised that you were insolvent?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[ellie 553]

I've sat here for ages trying to put this into words..The motivation was that we had a sale on the restaurant & house going ahead which would mean that we were not insolvent.The sale on the restaurant was imminent. The family loan was paid into the business account so was obviously a business loan - also told family the situation about our personal & business situation and had a lot of pressure to pay this back from them over Christmas. I didnt realise til yesterday that the business sale was not going through. Should I now ask them for the money back or can I justify this in any way if i decide to go bankrupt myself. My property sale is going through still - do I have any say in how I pay people eg can I pay employees from the small amount of equity left. I am most worried about the family loan even though I can show it going into the business bank account in march last yr. To be honest I could carry on trading for the next few months but it would be unethical and also detrimental to my children. I am just taking the view that I am declaring myself insolvent / bankrupt before some one else petitions us which could take til end of Feb. It is very hard to decide at what point you are insolvent on a day to day basis - if we had managed to sell the lease we would have been £30,000 in profit at the end of it but in bankruptcy the total debt is around £150,000. I am really having a hard time deciding what to do for the best

[MelanieGiles]

Are you saying then that you are still not insolvent, as you have value in the business which you still intend to sell, or has this value reduced since the time you effected the payment? And what value were you selling the business for and what is it currently worth?

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[ellie 553]

The business is for sale for £185,000. We will have £6000 equity from the house sale but no overdraft from the end of Jan. The value of the business will not decrease until such time as we declare ourselves bankrupt (then it will be worthless), or until we sell it for £185,000 or less. If we raise any amount from the sale of the business I was advised it could be offered as a full & f settlement in an IVF. An IVF would be viable if I could confirm profitability of the business for the unforseeable future. I am not able to do that due to unpredictable trading conditions.
I only heard about the sale falling through yesterday and I do not really feel able to make a decision on whether we are insolvent / solvent. I am sure my family would not want me to get into trouble if i explained the situation to them.

[MelanieGiles]

You mean an IVA!!!

If your business really is worth £185,000 - why not consider an IVA based upon a full and final settlement when it is sold? You would really need to effect this within a 12 month period, however, otherwise bankruptcy would become a real reality. What would the break up value of the business be - for instance if the catering and restaurant equipment were to be removed and sold separately?

And you would have to ensure that you were not incurring further losses by trading on.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[ellie 553]

I do mean an IVA - sorry have my sister on my mind at the moment!
It would be possible if we could predict the amount of income, but there is no equipment as it is all part of the lease. The only problem with continuing is the personal situation i am in due to separation from my partner, but also predicting future cashflow - we wouldnt have an overdraft (I am going to ask next week though!) and only have £6000 equity coming from the house to take us through til whenever it does get sold. We have unsecured debts of around £50,000 not including our DTI loan so do you have any idea how much per month an IVA would be ?

[MelanieGiles]

That would depend upon your cashflow, which as you say is uncertain, and also whether your business agents believe they can sell the business - because to be frank anything you can get for it is better than nothing, and I am concerned that by trading on you will be incurring losses rather than profits, with no source of funding apart from the small amount available from your house sale.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[ellie 553]

Ok - we have gone through all our finances with a fine toothcomb today. We could use the small amount of equity in the house to start February with our business current account in credit by £2000. We have done a cashflow projection until the end of May, and have both come up with a figure of £1500 left over to pay off our creditors. Assuming the SFLGS loan would not be put into an IVA and we carried on paying it as normal, our total debts would be £60,000.
They are mostly business debts and a few personal ones too - is it possible to put them together in an IVA?
In the meantime we would also make a full & final settlement by selling ther leasehold within the next 6 months.
We have underestimated a lot of figures so that the figure of £1500 is very realistic. Could an IVA could work ?