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Topic starter
04/04/2020 1:49 am
It looks certain that both me and my husband will need to declare bankrupt soon. My husband owes approx £50000 in loans/cards/catalogue. I owe around £16000 I think.
We rent our house and we have a car each on HP but both are in his name. No other assets. I am a housewife and my husband is self employed. He has a personal training studio where he runs bootcamps and does personal training. He has equipment in his gym but it's things like slam balls/sandbags/kettlebells, the equipment is all a year or 2 old and not in good shape so not worth much at all. He opened in 2018 so for 17/18 recorded a loss, 18/19 net profit £6000, 19/20 looking to be more profit, not sure how much yet. I'm a housewife so only income for me is tax credits, housing benefit and child benefit.
My husband stopped paying his debts about a year ago and I haven't been able to pay mine for around 3 months. We always meant to try and get back on track but didn't and now with coronavirus he's had to close so we have lost his income. We won't be able to pay the car finance on either car while he's not working and probably for some time afterwards as we will need to rebuild a client base so it looks like they'll get repossessed. There is some damage to one of the cars where someone scrapped it and drove away and we've not been able to afford to get it fixed. We need a car as my children go to school in the next village and we live in quite a rural area plus there are 4 kids so public transport will cost a fortune.
I think we qualify for a £10000 grant for the business which seems a lot but considering we've lost our my husband's income it won't go far. We usually do well over the spring/summer months and then work dries up after the summer so right now we would normally be earning a bit more so able to catch up on things like car repairs, clothes for the kids, things we've neglected over the winter. Can we use any of the grant for these things or would that be suspicious to the OR? As our cars will likely be repossessed can we use part of this grant to buy a cheaper car before going bankrupt or will this not be allowed. Will the OR also want an account of everything this grant has been spent on.
I know the OR is unlikely to come to our home but I almost wish they would to see we're not living some fancy lifestyle. We literally have the same furniture we bought from charity shops 15 years ago which is now broken. We never go anywhere or do anything and still struggle to make ends meet.
Is it likely my husband will be allowed to continue with his business, he's a sole trader with no staff. I don't think there's anything of value in his gym so I don't think there's any benefit to his creditors if they force him to stop. I doubt he will be able to make any sort of payment even if he keeps his income but if he has to stop we'll be entirely on benefits but will have much less money to live on because of the benefit cap. Either way it's unlikely his creditors will get anything.
We are only 18 months into a 5 years agreement on the cars so when they get taken back there will be money owed on them plus I assume they'll charge for the damage. Will this be included in the bankruptcy?
Sorry for all the questions, just terrified of the uncertainty of it all.
05/04/2020 10:37 am
Hi Marymill and welcome to the forum.
I’m sorry to hear that you are financially struggling and really feeling the pressure of it all.
The positive thing I wanted to start off with is that there is a solution to all of the debt and like you have said that’s probably going to be Bankruptcy for you both.
Based on both your situations and what you have told us you could proceed with a Bankruptcy, pay £200 each (that’s the Bankruptcy application fees in Scotland) and be discharged and debt free in 12 months. If your debts are less than £17k you could qualify for the Minimal Asset Process whereby the application fee is only £90.
You need to be careful about taking the £10,000 grant as realistically your husband has no way of paying this back and it could lead to a Bankruptcy Restriction Order under his Bankruptcy.
In relation to both cars and the finance, there is normally a clause in all finance agreements that advise if you enter into a Bankruptcy it can terminate the agreement. Normally though this doesn’t happen and as long as the finance payments are reasonable and going an afford them you may be able to keep both cars. If the cars did go back then the finance company would sell both cars in their current condition and any balance owed to them would be added as a debt in the Bankruptcy.
If not and you require a car then any car less then £3,000 in value is automatically not an asset.
When you refer to the “OR” do you mean the official receiver? In Scotland it’s a Trustee. I’m a little worried you are reading his Bankruptcy south of the border works and it’s different up in Scotland. In Scotland we don’t come to your house to look round or to look at your household possessions etc.
The Trustee would need to know about what business assets your husband has and if he is trading from a premises. If he does lease a premises then it’s possible that this would need to close upon the award of his Bankruptcy. If his business assets are worth very little then there is no risk to these.
I think it also might be a good idea for your husband to consider the viability of his business and ability to generate a sufficient income going forward whereby he can support everything. He may have turned a profit in the business but there is £50,000 of debt there. He also needs to think about the next couple of years and how quickly our society and economy will bounce back. In the short term it could be an idea for him to seek employment and then look th build the business back up once you are financially stable.
Like I said the positive thing is there is a way out.
David is not currently posting in the Trust-Deed.co.uk forum
Topic starter
05/04/2020 12:25 pm
Yes when I say OR I did mean official receiver, sorry.
The £10000 grant is because we've had to close due to coronavirus and doesn't need to be repaid. We qualify under the help announced by the Scottish government for businesses who qualify for small business bonus relief. Would we be ok to take it as it doesn't need to be repaid, just needs to be declared as income on his tax return?
I don't think keeping both cars would be a good idea as it's a lot of money each month and we do need to cut our expenses. If we buy a car for under £3000 before going bankrupt will the trustee have a problem with that?
The main reason for the debt is because we lived on the cards for a good while as the business took longer to get going than we thought it would. Longer term I'm looking for employment but we are both unqualified so it would be minimum wage jobs likely and his business has the potential to earn us so much more than that but if I get a job it at least gives us some steady income too.
When you say he may have to close the premise, does the trustee make him do that or would it be because the landlord of the premise makes him close? I don't see the benefit to the creditors of it closing as we'd then be unemployed and forced fully onto benefits which won't give the creditors any repayment anyway. Would they still make him close the premise?
07/04/2020 9:37 am
Hi Marymill,
My understanding is the same as yours regarding this grant (that it is not repayable). I can't see any issue with taking it. Provided it's spent on reasonable living and business costs there should be no issue. There's the risk of a problem if money gets spent on luxuries, or gambling, or is given away in the run-up to bankruptcy, but not on regular costs that we all tend to experience.
I also can't see an issue with owning a vehicle worth less than £3,000 provided you can demonstrate that you have a reasonable need for it.
The business premises, if they are leased, are more of a risk I'm afraid. There might be clause regarding bankruptcy in the lease agreement. The trustee might also want to see this liability removed. I agree that this appears to make little sense, but business activities involving staff and/or premises can be hit hard when someone becomes bankrupt.
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