Jon I am a serious situation and need some advice.
My business has been down in part due to the pandemic and lock downs, but it also slowed prior to this. I am at the point I am not trading at all. I have a lot of debt, near £50,000, much of it was from the company. I am concerned because I am now in default with these accounts and being threatened with being made bankrupt. I cannot go bankrupt as I own property with my wife and it is valued at £175,000. I need options to try and avoid being made bankrupt. Any advice is welcome.
I understand your worries and concern, and they are valid. Many people need to avoid bankruptcy in order to save a property.
Technically you are not insolvent, due to the fact your assets, the value of the property, exceed your debts. With that being said, let’s take a closer look at your situation.
And a few questions:
Are the debts in your name or the company?
Any accounts in the company’s name, were you a guarantor for them?
Is the property valued at £175,000, do you have a mortgage, or is the £175,000 value free and clear?
Is the property registered in yours and your wife’s name?
How is your company set-up, LTD, sole trader, etc?
In order for a creditor to make you bankrupt, you need to owe them £5,000 or more. Less than £5,000, they cannot make you bankrupt. They can make life miserable by obtaining a CCJ/Count Court Judgment, and possibly enforcing it with a Charging Order against the property, or other collection tools.
One way many people avoid bankruptcy is through an IVA/Individual Voluntary Arrangement. If the debts are more with the company, you could look at a CVA/Company Voluntary Arrangement.
The issue with these is that if you have assets, such as your property, and those assets exceed your debts, again you are not insolvent. The simplest thing to do, which no one wants to hear, is to sell the property and pay off the accounts.
If you were to be made bankrupt, and you only have £100,000 of equity in the property, half of this is your wife’s, depending on how the property is registered. So her half is safe, and she can be given the opportunity to buy-out your half.
Another option is a Debt Management Plan, paying what you can afford each month to the accounts. Most creditors will work with you on this. Then once you are able to make full payments again, you can do so.
As you can see, it can get complicated.
With some additional information, I can help advise you more.