scared witless of losing everything

[littleted]

I am self employed and scared witless of losing everything.
I owe Lloyds £20,000 business loan, no o\d facility
Halifax personal loan £18,000
Credit cards £31,000
Personal overdrafts of £2,500
M&S personal loan £5,000
I have a mortgage on my home of £112,000 and a mortgage on a buy to let of £100,000. Have been declined a re mortgage on my home despite it being worth around £150,000. Am struggling in my business to pay suppliers, yet I have a 10 year strong trading history with profit, my problems started with divorce 3 years ago.
My accountant is currently 'thinking' on my situation but I am running out of time...... Help

[luluj]

Any equity on your buy-to-let property? If so is it not worth considering selling this and using that money to pay off some of your debts.

An IVA might be one option, however high level of business loans may make bankruptcy a better solution for you.

[ellie 553]

hi littleted
Is your business worth anything if you were to sell it ?
I would get advice from a professional insolvency practitioner asap as there are alternatives to bankruptcy.

[carlmcmullen]

From what you are saying the business has a good history and it is your debts that have become the problem. I think selling the business may be a bit drastic.

Ask yourself the question... if you had no debt and only had to pay your day to day business costs and essential living costs, would you be able to survive, and if the answer is yes then you need to try and save the business.

Are you a director of the company, if so i would not suggest bankrupcy either as you will no longer be allowed to be a director.

Lulu has made a good sugesstion, howe much equity is in the Buy to Let, also is the rental payments covering the mortgage payments ?

Do you have any IR debts ?

Trading IVA's are very differnt to personal IVA's and there are certain things that need to be looked at if a trading IVA is to work.

Has your accountant given you any indication of what he is 'thinking' about ?

You may be better to get advice from an IP in the mean time and then you are exploring all the options that are availible to you.

[littleted]

Hi
If I didn't have what I consider 'large personal' debts then yes, my business can function very well. I have a good net profit and on paper all is well. Except it's not!
I do owe IR and also this is the first VAT payment that I haven't been able to pay- these are not huge amounts, but I don't have the cash to hand.
My buy to let is on the market and I would see £20,000 cash if it sells fast- this again being the problem as market conditions are rubbish.
All I know is that I need to make some decisions to safeguard my home and business, but I don't know what the answer is?

[ianmillington]

Hi

Can I ask you a few things please:

How much do you owe the Inland Revenue?

Do you have up to date accounts?

What is the nature of your business?

You refer to struggling to pay suppliers. If you were to say attempt an IVA thise suppliers would probably have to be included in it and you would then have to pay cash for ongoing supplies. Would that be feasible? Are there any suppliers you would deem irreplaceable?

I am particularly interested by your reference to a divorce, was there a financial settlement whereby assets were given away?

Your financial situation is straightforward. Don't take any action until these issues have been properly thought through and discussed with professional advisors. I note you have an Accountant which is a good start.

Ian

[littleted]

Hi

I owe the Inland Revenue £2600
I do have up to date accounts, and my business is retail. I have a 10 year established shop in a very seasonal town - hence my problem now. Usually enough money has been made in the summer months and christmas to see me through.
At the time of my leaving my husband we had 2 shops, the main one ran by me and him in the other. That shop has now closed down, the business is mine, but it came to light from last years accounts that about £12,000 cannot be accounted for that period. Another reason for my current hardship.
In the settlement, as mentioned I got the business and some credit card debt and he got the marital house. Unfortunatley (sorry to give all the nuts and bolts!) due to the way my solicitor wrote the court order I am still on the mortgage of my former home, and my ex has run the mortgage into arrears. I have no financial interest in the property at all, but as a result I have a crap credit rating and no way of financing until my peak months and commitments I can't meet. I turn over £100k and business is actualy 'up' for January.
DAH!!!!!

[ianmillington]

I think you need to look into attempting an IVA. However, please note:

Because it will be more complex than a standard consumer type case you will need to meet with an IP with a track record of doing traditional type IVAs. With your accountants help you will need to produce some profit and loss and cash-flow forecasts to demonstrate the viability of your business. These should also take into account the seasonal nature of your business.

Also, you need to give some thought to the treatment of your suppliers. Are there any key ones that you think you will need to exclude (without whom the business cannot function)or without struggling to repay the back debt will the cash flow enable you to pay your suppliers on a cash-with order basis?

A lot of work to do I know. However, my first impressions are that yours is the type of case for which the IVA process was originally devised.

Finally does your debt to HMRC include the SA tax liability that will have just fallen due (on 31 January)?

Hope this helps

Ian

[littleted]

Thanks for your input. Yes it does help. I am told by my accountant this afternoon that mine is a very tricky case as I am only 'just' insolvent and not out and out bankrupt, with the added complication of strong trading still. If I sold my rental flat today I could re-stabilize my business thus making it possible for me to meet my credit commitments. IF IF IF!!
Thanks for the people who have responded as I can now see a course of action, my main priority now is to try to agree some terms with suppliers, and the credit card companies, and am also looking at protecting my equity in my home just in case, as I feel my sitution could change for the better or worst rather quickly. Does this sound like a plan or am I missing the main issue here?

[ianmillington]

Hi again

I note your accountant tells you you are "just" insolvent. Bear in mind that insolvency is also an inability to pay debts as and when they fall due and you would seem to have fallen well into that category. Yours is indeed a tricky case.

To help you focus on the major issues I can summarise my assessment of your current position.

Based on your info you have

Consumer debt of £76,500
HMRC of £2.6k plus 1 quarters VAT.
Possibly £80k in total thereabouts? plus whatever you owe to suppliers?

You have indicated £38k equity in your house and £20k in the buy to let. That gives a shortfall of £18k not counting suppliers. Is the balance the value of your business? Also, ignoring any income or mortgage on the buy to let, the total debt your business currently has to service is about £200k including your mortgage. Your business is seasonal (Easter to October?) so would I be right in thinking that whilst you anticipate a rosy future for it is currently at a low point?

On a cash flow basis you have some problems I think. I am wondering how you will go about getting the money to pay your suppliers to buy the extra stock you'll need when things pick up.

Ian

[littleted]

Hi Ian

That's why I'm at a total loss at what to do. Yes there is value in the business if it were to be sold, which I really don't want.
Yes cash flow is an issue at the moment, but easter is only 6 weeks away (I am a half full kind of girl)
I know I need to address the debts that I have, but doing it so that my home and business don't suffer is proving to send me into an early grave at 33 years old!!!
I do appreciate your response, thank you. I am just very weary of commiting myself to something that in a few years time could cause me problems- mainly my home as I understand a lot of IVA's have the equity clause in the 4th year. Having been declined a remortgage I don't hold out a lot of hope except for 2nd rate lenders.
Most of my suppliers I have been using for years and are quite essential to my trade, so including them as creditors would be putting myself again in a tricky position.
Some days I feel like throwing the towel in and going bankrupt, but I have worked hard at this business and survived a divorce and it would be such a waste.

[ianmillington]

Hi again

You don't need to throw the towel in - that's the last thing to do. Modern day remortgage clauses tend to be rather more sophisticated than they used to be and properly reflect your ability to pay the revised mortgage subscription and whether or not you can actually borrow the money. To do 4 years and for it then to fail simply because no-one will lend you the money is not an option. In the current climate this would be addressed by an extension to the VA not exceeding 12 months.

In my experience, if the IVA of a trader fails, it is generally due to an inability to make the monthly contributions caused by the the business simply not being viable. That is why I referred in an earlier post to cash-flow and profit and loss forescasts which would be necessary before you entered into the IVA.

My view is that until you have dealt with the debt issue (some of your credit will no doubt be at a pretty high interest rate)you will struggle to make any headway as you will continue to simply rob Peter to pay Paul. I can only again suggest you speak to an Insolvency Practitioner (preferably near to you) for a detailed talk through of your options.

Regards

Ian