Another BBL help thread. Business failed with debt to bank. Currently worried and unsure what to do

[mart321]

Hi all, I was hoping for some advice on the situation I currently find myself in. I set up a business in 2016, offering bespoke fabrication services on site. I had a few successful years before COVID hit. I took out a BBL of £15000 to try and grow my business and help me through a difficult time with the downturn in work due to COVID. The loan was mostly spent on tools and machinery.

In the end I was not able to make the business work. Most of the clients i worked for changed their methods and wanted myself to work on a PAYE basis. I was unable to secure any further work after 2022 through my business.

I continued to pay off my BBL by transferring money from my personal account until October 2023. The current debt is now £10250. At this time I was unable to pay anymore because of my own financial situation. I spoke with an accountant and he suggested that I wind up my business, as moving forward I would be unable to work though it. He started the process to do this. He started the process of insolvency for me.


In the meantime I sent a letter to virgin money explaining the situation. Virgin money did not get back in touch until the loan subsequently failed when there was no funds to pay back the loan. They have now lodged an objection to the company being struck off and sent me some threatening emails, telling me that my credit score could be effected and that I need to get in touch asap etc.

As it stands i have had 2 missed calls off them and a couple of emails. I'm currently losing sleep over this and feel constantly stressed out. I'm actually scared to speak to the bank now because I'm so nervous about them threatening me with bailiffs or similar.

They stated in their letter that they would pass the debt onto a debt collection agency. My wife has no idea of the financial mess that I am in and I am scared stiff of people turning up at my door and threatening to take possessions.


Can anyone offer advice on what I should try to do in this situation because I'm currently at my
wits end.

 

[japancool]

They have now lodged an objection to the company being struck off and sent me some threatening emails, telling me that my credit score could be effected and that I need to get in touch asap etc.

Ignore them. Objections have become the norm.

They stated in their letter that they would pass the debt onto a debt collection agency. My wife has no idea of the financial mess that I am in and I am scared stiff of people turning up at my door and threatening to take possessions.

It isn't a personally guaranteed loan. It is a debt belonging to the company, not you. Assuming you didn't just transfer all the money to yourself, as you said you didn't, a debt collector can't take any goods. Only a High Court Enforcement Officer can do that. All a debt collection company will do is try to pressure you into paying up. Know your rights, and what they can and can't do. If they make false claims about their powers (like suggesting you might go to jail if you don't pay), they could lose their license.

Of course, this also assumes you don't have an overdrawn director's loan account.

If you're concerned about it, call the businessdebtline.

Debt advice | Free Debt Advice and Support | Business Debtline

businessdebtline.org

 

[Spongebob]

You have nothing to worry about. The system is currently clogged up with thousands of cases just like yours.

The debt is not yours - it is owed by the company. You have no personal liability whatsoever.

The bank will be able to reclaim the debt from the government under the Bounceback Loan guarantee. To do this however, they will have to demonstrate that all reasonable actions have been taken to recover the debt from the company and that it is now uncollectable.

You can help them out by sending them a customised version of The Spongebob Letter which gained some fame on these forums a few years ago. This is the letter I sent to my bank a couple of years ago when they were getting a little heated over my company's outstanding Bounceback loan. I haven't heard a word from them since. It works!



XYZ Ltd
High Street
Trumpton

23.11.2021


Toytown Bank plc
Camberwick Green

Your ref: 4700978653

Dear Sir/Madam

Re: XYZ LTD - Co Reg No 32987760

It is with deep regret that I must inform you that the above company has ceased trading due to becoming insolvent. The difficult decision to cease all trading activities has been forced upon me so as to comply fully with my responsibilities in law as a company director.

A thriving business was brought to its knees during the lockdown period last year and the second lockdown earlier this year has proved terminal. The bounce-back loan kept us afloat for a few extra months but ultimately was insufficient to cover our overheads until business could improve.

Unfortunately the company has insufficient realisable assets and no funds with which to appoint an insolvency practitioner and thereby initiate a voluntary liquidation. I am not in a financial position to fund this personally, having now lost my livelihood.

The company therefore, will now lie in a state of ‘limbo’ until either Companies House strikes it from the register or a creditor winds it up through the High Court, leading to the Official Receiver being appointed as liquidator. As you are a creditor of the company I would ask that you consider taking this step so as to bring about the early resolution of the company’s affairs.

Yours faithfully,

Bob Sponge
Director.

Nobody is going to go to the expense and work of winding up a company in these circumstances. The bank will be able to claim on the government guarantee. Eventually, and it may be some years away, Companies House will strike the company from the register for not submitting the annual Confirmation Statement.

In the meantime forget all about it and get on with the rest of your life.

 

[mart321]

Ignore them. Objections have become the norm.



It isn't a personally guaranteed loan. It is a debt belonging to the company, not you. Assuming you didn't just transfer all the money to yourself, as you said you didn't, a debt collector can't take any goods. Only a High Court Enforcement Officer can do that. All a debt collection company will do is try to pressure you into paying up. Know your rights, and what they can and can't do. If they make false claims about their powers (like suggesting you might go to jail if you don't pay), they could lose their license.

Of course, this also assumes you don't have an overdrawn director's loan account.

Thank you for the time and effort. That's put my mind at ease slightly. I have never had a director loan as far as I am aware. I had an accountant who would do me a yearly return, that's about it really.

I definitely didn't just transfer the money out. It was spent gradually over a couple of years on tools, machinery and modifications to my workspace.

I have actually just been going back over all my transactions for the last 5 years. Every time I see someone that doesn't look very business orientated such as, tesco, I get nervous.
I do have many businesses expenses on my account, from B&Q, Screwfix, eBay, Amazon, AliExpress, Alibaba, Toolstation, royal mail etc.

But looking back now I also have plenty of transactions at Tesco and even some from food places such as McDonald's.


I feel like they are going to look back over every transaction I have made and scrutinize it.

 

[japancool]

I feel like they are going to look back over every transaction I have made and scrutinize it.

Unlikely. What's more likely is that the bank will keep objecting until they get bored and realise they're not going to get their money, and give up.

However, there are reports that it can take up to 2 years before that happens at the moment. In the meantime, don't worry about it, and if anyone turns up at your door, tell them to jog on.

 

[mart321]

You have nothing to worry about. The system is currently clogged up with thousands of cases just like yours.

The debt is not yours - it is owed by the company. You have no personal liability whatsoever.

The bank will be able to reclaim the debt from the government under the Bounceback Loan guarantee. To do this however, they will have to demonstrate that all reasonable actions have been taken to recover the debt from the company and that it is now uncollectable.

You can help them out by sending them a customised version of The Spongebob Letter which gained some fame on these forums a few years ago. This is the letter I sent to my bank a couple of years ago when they were getting a little heated over my company's outstanding Bounceback loan. I haven't heard a word from them since. It works!



XYZ Ltd
High Street
Trumpton

23.11.2021


Toytown Bank plc
Camberwick Green

Your ref: 4700978653

Dear Sir/Madam

Re: XYZ LTD - Co Reg No 32987760

It is with deep regret that I must inform you that the above company has ceased trading due to becoming insolvent. The difficult decision to cease all trading activities has been forced upon me so as to comply fully with my responsibilities in law as a company director.

A thriving business was brought to its knees during the lockdown period last year and the second lockdown earlier this year has proved terminal. The bounce-back loan kept us afloat for a few extra months but ultimately was insufficient to cover our overheads until business could improve.

Unfortunately the company has insufficient realisable assets and no funds with which to appoint an insolvency practitioner and thereby initiate a voluntary liquidation. I am not in a financial position to fund this personally, having now lost my livelihood.

The company therefore, will now lie in a state of ‘limbo’ until either Companies House strikes it from the register or a creditor winds it up through the High Court, leading to the Official Receiver being appointed as liquidator. As you are a creditor of the company I would ask that you consider taking this step so as to bring about the early resolution of the company’s affairs.

Yours faithfully,

Bob Sponge
Director.

Nobody is going to go to the expense and work of winding up a company in these circumstances. The bank will be able to claim on the government guarantee. Eventually, and it may be some years away, Companies House will strike the company from the register for not submitting the annual Confirmation Statement.

In the meantime forget all about it and get on with the rest of your life.

Thanks so much for the reply. That template letter is almost identical to the one that my accountant sent me. I modified it slightly for my own business. I couldn't find a suitable address to post a letter, so I phoned the bank and explained I had some information which I needed to email them.

I then emailed them my version of this letter. Does it make a difference that I didn't physically sent them a letter? I'm worried about this now.

As it stands they say if I do now get in touch with them by Feb 1st, they will send me a final warning notice and thena Pass the debt on to a debt collection agency.

my main worry is that, I know the system has been abused by a large majority of people and I'm worried that they are just going to come down hard on everyone. I tried to pay as much of the debt back as a I could (£4750) before i was struggling financially.

I also worry about my credit score. I thought there would be no impact but the bank are saying that there will be and that they can pass on information to credit agencies.

I may be moving property in the next couple of years and i also may need a loan. I have kept a track of my credit score and it's currently around 622/710 on credit karma.

 

[japancool]

I also worry about my credit score. I thought there would be no impact but the bank are saying that there will be and that they can pass on information to credit agencies.

I may be moving property in the next couple of years and i also may need a loan. I have kept a track of my credit score and it's currently around 622/710 on credit karma.

Others will know in greater detail, but I believe (all? some?) mortgage lenders will look at any history of company failures and take that into account. If you try to raise finance for another company, you may also encounter the same issue.

As it stands they say if I do now get in touch with them by Feb 1st, they will send me a final warning notice and thena Pass the debt on to a debt collection agency.

Let them.

 

[ChrisCallaghan]

However, there are reports that it can take up to 2 years before that happens at the moment.

For now they are not happening at all. If the bank do cease objecting, Department of Business and Trade start. However this cannot last forever, and sooner or later the government will have to decide whether to let these companies be struck off, or instigating mass winding up of companies. Unfortunately we just don't know long it will take for government to make a decision on what to do with companies in the same position as OP's.

For context, a client of mine has been waiting for their strike off to go through since Jan 2021.

Till then, I agree with everything @japancool and @Spongebob have said.

 

[Spongebob]

...sooner or later the government will have to decide whether to let these companies be struck off, or instigating mass winding up of companies. Unfortunately we just don't know long it will take for government make a decision on what to do with companies in the same position as OP's.

For context, a client of mine has been waiting for their strike off to go through since Jan 2021.

It would be interesting to know overall how many companies there are in terminal default of their bounce-back loans while remaining outside the formal insolvency system. My suspicion is that there are many tens of thousands.

It is very unlikely that the current administration will do anything at all on this particular issue in the run up to an election. To write off potentially billions of pounds which currently sits on the national balance sheet would be electorally damaging, particularly as it results directly from a policy personally instigated by the former Chancellor - now the Prime Minister.

An incoming government will have to pick up the pieces. This is just one small aspect of the omnishambles they are about to inherit of which they are probably not even yet aware.

I don't envy them.

 

[WaveJumper]

I was having a read here last week:

BBLS, CBILS, and CLBILS Evaluation Report 2023 - British Business Bank

Read more on the British Business Bank’s new report, Finding What Works: Pathways to Improve Diversity in Venture Capital InvestmentOur Covid-19 Loan Scheme Evaluation 2023 Report provides an updated assessment of the impact of the BBLS, CBILS and CLBILS on borrowers.

www.british-business-bank.co.uk

 

[IanSuth]

Thank you for the time and effort. That's put my mind at ease slightly. I have never had a director loan as far as I am aware. I had an accountant who would do me a yearly return, that's about it really.

A directors loan is where for instance you withdrew money from the company for non legitimate business expenses - you would "owe" that money to the company - equally though if you were paying your personal money into the company to cover the £4k of BBL repayments - you may actually be in credit on your directors loan account

Your accountant will be able to instantly tell you

 

[ChrisCallaghan]

It would be interesting to know overall how many companies there are in terminal default of their bounce-back loans while remaining outside the formal insolvency system. My suspicion is that there are many tens of thousands.

It is very unlikely that the current administration will do anything at all on this particular issue in the run up to an election. To write off potentially billions of pounds which currently sits on the national balance sheet would be electorally damaging, particularly as it results directly from a policy personally instigated by the former Chancellor - now the Prime Minister.

An incoming government will have to pick up the pieces. This is just one small aspect of the omnishambles they are about to inherit of which they are probably not even yet aware.

I don't envy them.

My guess is much like the rest in my industry I suspect....

There are not the resources in the Insolvency Service. The government does not wish to see companies with outstanding BBLs closed without there being an investigation, in each case, on how BBLs were spent and if the right amounts were borrowed. True, the Insolvency Service have now been granted the powers to investigate the actions of directors from dissolved companies, but if they start letting them be dissolved or start winding them up through the courts en masse, the Insolvency Service couldn't cope.

And so... indefinite objections to any and all strike off action, without taking action to wind. The hope is clearly that they are pushed to insolvency practitioners, so that we/they can handle the investigation work, and financial recovery where BBL abuse or fraud can be identified.

For those that have a Bounce Back Loan as the only debt in the company, plus a strong constitution, this is bearable. As I have mentioned on various threads, all a BBL lender will do is send letters, make phone calls, and eventually pass to a collections company who will repeat the same.

For those struggling with stress or mental health concerns, this can be intolerable. Especially if they have other creditors who will send bailiffs. @Spongebob , you and I know our rights and could easily fend off a bailiff visiting our home addresses trying to enforce against a non-trading asset-less Ltd. Others not so.

I personally still advise akin to @Spongebob 's guide to those who cannot fund a liquidation, as do the only company debt charity, Business DebtLine. However the reality is that many are now turning to a voluntary liquidation process due the stress and anxiety of having a company in this limbo status causes.

 

[mart321]

Hi all. Just wanted to update the thread on what's happening with my limited company since I made this thread.

I took the advice, sent the template latter with some minor adjustments.

I was then occasionally contacted by virgin money saying the debt was owed and how it could effect my credit score.

They then sent a letter saying they may pass the debt onto a debt collection agency.

I have ignored it all and carried on with my life.


Now, it appears they have instructed Drydens solicitors. I have received a letter stating the money i owe and asking me to get in contact. They have also started messaging me telling me to contact them.


Has anyone else received letters from them or similar??

 

[ChrisCallaghan]

Hi @mart321 ,

Yes this is standard. The advice remains the same. As you have already written to Virgin Money explaining the situation, you need not respond Drydens. If you wish, you can send them a copy of the letter you have previously sent to Virgin.

 

[mart321]

Hi @mart321 ,

Yes this is standard. The advice remains the same. As you have already written to Virgin Money explaining the situation, you need not respond Drydens. If you wish, you can send them a copy of the letter you have previously sent to Virgin.

Thanks Chris. You've put my mind at ease once again.