Hello Stephanie.

As you have identified, your friend is probably going to have to take a hard look at the business and whether it has the potential to turn around within a realistic period of time.

If it doesn't, she may conclude that a return to employment might make sense for her. This would provide an income that might enable her to repay the contractual debt repayments or, if not, provide access to a debt arrangement scheme for example to repay the debts at an affordable rate. DAS would not involve her home (unlike bankruptcy or trust deeds).

Temporarily she may be able to arrange making "token payments" (perhaps £1 per month to each creditor) to help buy some time to get back on her feet. Creditors are often quite understanding about this, they mostly understand that circumstances change and will often show some flexibility to people that are putting a longer-term plan in place so long as there is good communication between the parties.

Thank you TDA, the main problem she has here is that she can't get employment. She has sent off over 400 applications from cleaning jobs to office jobs and she has had a couple of interviews but nothing has come forward. She knows that she needs a job but can't get one, if she could she'd close the doors on her business tomorrow. What can she do if she can't get a job ??

That's maybe where token payments might help to buy her some time Stephanie.

I guess an alternative would be to sell the home and repay the debts that way (assuming that there would be enough cash raised to repay the debts?). We often hear from people that selling their home would be an absolute last resort though.

Hi Stephanie,

When you speak about your friends ÔÇ£businessÔÇØ do you know if is she a sole trader or is it a limited company?

Also, are you able to advise what type of business it is that she has set up?

As TDA has said, if your friend is unable to turn the business around within a suitable timescale then the hard decision of stopping should be taken.

If she stops then finding employment may be the way to repay her debts i.e. credit cards and also mortgage payment.

It's a very difficult market at the moment for employment and it could take your friend some time to find suitable employment which will allow her to pay her bills and debts. In that time, if she isn't paying her mortgage then there is a risk that she may lose the property.

If your friend is unable to find a job then she may consider selling her house (as a last resort) to pay her debts. This may allow her some control over this instead of the mortgage company repossessing if she has failed to maintain the mortgage.

Hi Chris, she is a sole trader, and it's in the service industry, I don't want to say too much, I think 5 years ago it would have been successful but people just don't have the money to spend.

She has 6 dogs at home and I suggested last night selling her house and moving to a flat, she absolutely doesn't want to do that as she can't take her dogs with her. (she takes her dogs to work). It's a horrendous position for her to be in and I was really worried about her as she broke down last night. She is on her own and she must feel so lonely with it all. I just wish I had an answer for her 🙁

It is a horrendous situation for her to be in and your friend has my sympathies.

Something has obviously got to change and hopefully soon, but as Trust Deed Assistant says it is often possible to buy some time by making token payment offers. Hopefully she can find work in the meantime.

Do you know if she is claiming what she might be entitled to in terms of benefits/tax credits?

Hi Kevin

She isn't claiming anything. She has slowly been selling off everything in her house and personal belongings that are of any value and that is how she has been paying her mortgage and living. She now has nothing left to sell. She took £30 last week out of her business to feed herself and her dogs, she's absolutely ran out of everything. She was on a £35k job before she retired and all her life savings have now gone due to her business. I feel so so sorry for her, especially being on her own.

I think she needs to shut the doors of her business and focus on getting a job, easier said than done at the moment !

It's a very difficult situation that your friend must find herself in especially as she is on her own.

I know it isn't ideal but sometimes it's difficult for someone to remain in their property if they have debts and no means of paying them or the mortgage. Is your friend able to pay her mortgage payment each month?

Eventually either the mortgage company or one of her unsecured creditors could take action against her. Making token payments as TDA has said can help keep the unsecured creditors under control but it doesn't deal with the debt. We ran a money advisor training session recently and the solicitor who was speaking at it and acts for many large high street banks advised that someone should always try to make token payments to the creditors.

I had posted before I seen your response about your friend sending over 400 job applications away so realise that your friend has been trying to find employment.

In a worst case scenario If your friend has sufficient equity in her property to pay her unsecured debts off and with the possibility of having some equity left over then this may be an option in order to retain some control over the property sale. If the mortgage company were to repossess the property their main focus would be selling the house to obtain their balance back and not necessarily doing what's best for your friend.

I would certainly suggest she needs to speak with an advisor sooner rather than later so she is aware of all the possibilities. The first step is her opening up to someone which she has done to you and now we can help her with advice via you.

Thank you Chris, I've sent her some names & numbers from this forum - hopefully she contacts one of you soon. Thank you all for your advice.

Your welcome Stephanie.

Hopefully when she speaks with an advisor she will feel a little better and have a better understanding of things as for a lot of people it's the fear of the unknown that really worries them.

Can she reduce the hours in the business, 11 hour days to not make a living is horrendous. Presumably she has little time to spend on her social or family life outwith. It is really hard for anyone to decide to cut their losses, she must have had a lot of hope and confidence in her business plans 3 years ago.

It is a terrible time to sell a property and arguably a worse time to have a lender repossess and sell at potentially rock bottom prices.

Whilst business decisions seem to be inevitable, something has to change there, she could possibly consider a lodger / sharer to help with the mortgage. I'm not a dog lover so I'm biased but 6 dogs in the house might limit the customer base?

Difficult as it is, time will take choices away if something doesn't change and while there are possible choices, she would be best to really consider them.

You can't do it for her though and it's not easy to watch someone you care about make a horrible situation worse.

Short term, reducing outgoings would seem important, credit cards etc will accept a small payment arrangement for a time. She could rent her home but she would still need to move elsewhere and rent herself.

No quick and easy answers unfortunately.

If she opted for a DAS scheme, she'd pay a little over a potentially long time, we don't know the amounts involved so that might not be workable but would avoid losing her home if it were.
If she opted for sequestration, I think she'd need to sell the house or hand it back to be sold by the lender or the trustee to fund the sequestration.

I think I read here before that it was possible to pay a trust deed at the outset rather than contributions on an ongoing basis so long as there was enough for fees and dividends. That seemed to be very specific individual scenario though.

Would she be willing to speak with any of the experts here?

Thank you, I'm not sure she's not answered my e-mail. I did send her some contact details. It's difficult because I don't want to ask her the exact figures, she's a 55 year old woman that is probably cringing at the fact she opened up at all. I can only give her the names of the professionals to speak to, the rest is up to her. She's a poor soul. It's just such bad timing in every area for her. So unfair.

Hi Stephanie

I assume the property is just in her name? If joint, this may at least provide some slight benefit.

Looking at the income position, it is unlikeely that there will be any solution which does not involve the property and more than likely it's sale. Sometimes the hardest thing is accepting the position, but at least she could take this under her own control. This would at least free up funds to assist her with rented accommodation and then let her review thing once matters had settled.

Sorry it's not a more positive solution.

Mark

Hi Mark, the property is in her name only. forgive me if this is unethical, but is there a way that she could transfer the property into another persons name? I'm not sure if you can do this or not or whether the other person would have to apply for a mortgage and effectively buy the property. It's unlikely she'll know anyone that could get a mortgage on her behalf. She's terrified of losing the house, I just think there must be a way round it for her...... I hope 🙁