Bankruptcy & BBL (sole trader)

[In a mess]

Looking for advice as I had a bit of a shock that blindsided me today - hence not being able to sleep

Background
I’ve been self employed in various ‘service’ industries for many years, mostly geared around education and training, and have been fortunate to be able to do this from home, not needed additional premises/additional business costs and other than my own personal debts (credit cards) have bobbed along nicely.
Late 2018/early 2019, it came to my attention that there was a lack of training providers for evenings and weekends in a field I was already in.
I explored that opportunity, spoke to several existing providers outside of my area to get a better understanding as to why that was the case, and realised that I could set up, in conjunction with my then existing business, and run the 2 together, as I was in a better position than most providers to offer ‘unsocial hours’.
One of my existing clients, who was already in a similar field I was looking at, expressed an interest in working for me if I explored it further.

I then spent several months researching, running various figures, etc and decided to give it a go.
What was the worst that could happen?! (We’ll come to that later )

Initial feedback from potential clients was promising, course fees were competitive, but it also became apparent that I would need to be able to offer ‘open courses’ and therefore a venue to host those type of events.
I sourced a small local office, 6 months half price rent, 12 month initial tenancy, with access to additional larger on site training rooms, and honestly things were looking really positive for this new venture.
I went ‘live’ in January 2020, with the plan to move into the premises at the end of March ready for the first booking of a full open course in the April.
Yup, “THAT” March
Lockdown hit.
Double whammy, neither business, 1 or 2(new) could operate.
I’m sure you all know, and understand, the confusion, fear and panic in those early days/weeks.

Then along came the ‘lifeline’ of BBL’s
- this is where I’ve messed up, and only found out today

I have 2 BBL’s, 1 for each business!
Both are with the same bank

Business 1 ceased trading in September last year, it never really recovered due to the various restrictions and subsequent lockdowns, and the natural leaving of clients (usually have for 3-4 years before moving on)
Business 2 whilst it is still live, has been dying a slow and painful death for the last 2 years - market is being flooded and course prices are a race to the bottom (which I refuse to be a part of & couldn’t afford to do anyway), to the point where I’ve actually retrained into a different industry (business 3) to earn money to keep business/head afloat (and have failed miserably)

Personal debts racked up on top over covid and beyond, and I’m now looking at £50k of debt and bankruptcy.

Been working with business debt line and that was how it came to light that I should never have had 2 BBL’s
Bus 1 outstanding is £8.5k and bus 2 is £15k
I genuinely applied for each separate business as I believed it was allowed for each business
Apparently not

I feel sick, and now terrified that on top of having to go bankrupt I’m going to prosecuted for fraud even though that was not and never my intention, I was trying to survive
(BDL did say that if it had been the intention to defraud I’d probably have gone to different banks, I answered if I was intending to commit fraud I’d have done it for a hell of lot more money and wouldn’t have been busting my guts out for the last 4 years trying to save my businesses)
If that was to happen (fraud prosecution) my current business is then under threat as it’s dbs checked every 4 years and I could be struck off, leaving me bankrupt, unemployed and unemployable! Oh, and still in debt, and I don’t even have the money to pay for £680 to start the proceedings in the first place

I’m struggling to see how on earth I’m going to sort this mess out
I feel stupid, naive, and I don’t know what to do or where to turn now.

Please, if anyone has any advice, I’ll gladly hear it because right now, I’ve got nothing but fear controlling my head

 

[UK Contractor Accountant]

Assuming you operated bus 1 & 2 as a sold trader you should have in hindsight added the turnover of both businesses together and applied for one BBL. A mere oversight and misunderstanding of the rules on your part.

There was no attempt here to falisfy the application figures or to abuse the BBL funds so will be looked on favourably should it be eventually looked at by the Investigation authorities. They have far more serious cases to investigate at the moment with fraudsters who targeted the BBL scheme due to lack of any basic checks on applications received.

Anyway if the Bank had done their job properly they should have registered the first BBL on the central database for BBLs so it gets flagged up when a second application is received from the same person/entity.

Under the scheme rules you were allowed to apply for a top up of loan if you originally applied for less than the maximum allowed so that is effectively what you have done here.

Are the BBL's in default?

 

[ChrisCallaghan]

Hi,

Firstly I'm so sorry to hear about the stress and anxiety this situation has caused you.

I cannot address all of your concerns here in a short post, specifically whether bankruptcy is the appropriate process for you, without some further background info, but I can address some of your concerns.

Cost of bankruptcy: if you presently cannot afford the full £680 in one go, you can save - when you complete your application online, there is the option to save it, and make part payments when you can. When the £680 is reached, you can process your application.

Multiple BBLs: I think intent is crucial here. When declared bankrupt, a trustee is appointed to manage your affairs and investigate your conduct, such as applying for multiple BBLs, and the Insolvency Service will dertimine if any action against you is appropriate. This can include Bankruptcy Restriction Orders (these extend the number of years you face bankruptcy restrictions) and prosecution. I cannot say for certain, but I think given the amounts taken and based on other published cases, I think prosecution is extremely unlikely. Your intent was not to defraud, and that is crucial. Worse case scenario I expect would be a Bankruptcy Restriction Order for a couple of years, and they might not even seek that under the circumstances.

 

[In a mess]

Assuming you operated bus 1 & 2 as a sold trader you should have in hindsight added the turnover of both businesses together and applied for one BBL. A mere oversight and misunderstanding of the rules on your part.

There was no attempt here to falisfy the application figures or to abuse the BBL funds so will be looked on favourably should it be eventually looked at by the Investigation authorities. They have far more serious cases to investigate at the moment with fraudsters who targeted the BBL scheme due to lack of any basic checks on applications received.

Anyway if the Bank had done their job properly they should have registered the first BBL on the central database for BBLs so it gets flagged up when a second application is received from the same person/entity.

Are the BBL's in default?

Thank you for replying

Hindsight is wonderful, wish I’d had better foresight

Yes, businesses are/were run as a sole trader
Both are in default, along with my personal debts, hence contacting BDL.

I have managed over the last 8 months & thanks to business 3, to clear my priority debts (council tax, rent arrears, utilities etc)
HMRC self assessment I have an arrangement to pay that ends in September (just in time for 23/24 tax bill)

 

[In a mess]

Hi,

Firstly I'm so sorry to hear about the stress and anxiety this situation has caused you.

I cannot address all of your concerns here in a short post, specifically whether bankruptcy is the appropriate process for you, without some further background info, but I can address some of your concerns.

Cost of bankruptcy: if you presently cannot afford the full £680 in one go, you can save - when you complete your application online, there is the option to save it, and make part payments when you can. When the £680 is reached, you can process your application.

Multiple BBLs: I think intent is crucial here. When declared bankrupt, a trustee is appointed to manage your affairs and investigate your conduct, such as applying for multiple BBLs, and the Insolvency Service will dertimine if any action against you is appropriate. This can include Bankruptcy Restriction Orders (these extend the number of years you face bankruptcy restrictions) and prosecution. I cannot say for certain, but I think given the amounts taken and based on other published cases, I think prosecution is extremely unlikely. Your intent was not to defraud, and that is crucial. Worse case scenario I expect would be a Bankruptcy Restriction Order for a couple of years, and they might not even seek that under the circumstances.

Thank you for replying, I’m very grateful

I’m happy to go with a BRO if that’s what it takes, and after the discussions with BDL, as much as it scares me, bankruptcy certainly feels the better option than an IVA route

Covid has made me extremely cautious about feeling my income is secure anymore, and although business 3 is doing well at the moment (I’ve been able to clear all my priority debts excluding self assessment which should be cleared in September) I’m not banking on anything, if that makes sense, so an IVA could fail.
At least with a BRO, if anything bad happens, they’ll support any change that may be needed temporarily
Chances are a BRO would also be for less time than an IVA would be

At least, that’s my understanding (if I’ve misunderstood please let me know)
I’m not a ltd co, and have no desire to become one, so that’s fine too


If I started the process, would I let everyone know I’m starting bankruptcy or do I have to wait to inform them till I’ve paid in full?

 

[In a mess]

Under the scheme rules you were allowed to apply for a top up of loan if you originally applied for less than the maximum allowed so that is effectively what you have done here.

I didn’t apply for a top up, I did however, pause for 6 months on both, and I think extended on the larger
I’ll be honest, my heads not on straight after no sleep, and I’d need to get the paperwork together to confirm

 

[ChrisCallaghan]

If I started the process, would I let everyone know I’m starting bankruptcy or do I have to wait to inform them till I’ve paid in full?

Always a tricky one. Personally I'd advise any creditors that are putting on the pressure that you intend to self declare for bankruptcy once you have the funds. Whilst you are saving up, you might want to explore the Debt Respire Scheme, aka Breathing Space. I don't think Business Debt Line can set these up, but I would ask them first, as most of your debts relate to your businesses. If they can't, see:

https://www.stepchange.org/how-we-h...AHNuJ-x46CxPAnv6-pRoCNQkQAvD_BwE&gclsrc=aw.ds

 

[Newchodge]

Thank you for replying

Hindsight is wonderful, wish I’d had better foresight

Yes, businesses are/were run as a sole trader
Both are in default, along with my personal debts, hence contacting BDL.

I have managed over the last 8 months & thanks to business 3, to clear my priority debts (council tax, rent arrears, utilities etc)
HMRC self assessment I have an arrangement to pay that ends in September (just in time for 23/24 tax bill)

I may be wrong, but if both businesses were run as a sole trader, you have not got a loan for 2 businesses, you have a loan for you as sole trader and a second top up. Please stop worrying about that. It really is not a big deal in the scheme of things.

 

[ChrisCallaghan]

I may be wrong, but if both businesses were run as a sole trader, you have not got a loan for 2 businesses, you have a loan for you as sole trader and a second top up. Please stop worrying about that. It really is not a big deal in the scheme of things.

I've come across cases like this before Cyndy. Not sure if this is OP's situation, but I had a client who also had two sole trader businesses, with separate bank accounts for each, yet with the same bank. The bank in question clearly didn't have due diligence checks in place for this scenario, and the client had taken out a BBL for each business, as opposed to one BBL and a top up.

Ultimately he chose IVA, mainly because he had a property, all be it with minimal equity, that he wanted to protect.

 

[In a mess]

I've come across cases like this before Cyndy. Not sure if this is OP's situation, but I had a client who also had two sole trader businesses, with separate bank accounts for each, yet with the same bank. The bank in question clearly didn't have due diligence checks in place for this scenario, and the client had taken out a BBL for each business, as opposed to one BBL and a top up.

Ultimately he chose IVA, mainly because he had a property, all be it with minimal equity, that he wanted to protect.

This is correct Chris.
It was 2 separate loans, and 2 new business bank accounts had to be opened for the funds to be deposited into.

Bankruptcy is looking the better option as I’m in rented accommodation with very little in the way of assets
A 14 yr old car that is needed to do business 3 (and 2) in (probaby get 3k if I had to sell, but that wouldn’t cover the cost of a 2nd hand replacement vehicle for business 3)
Equipment needed to do business 2, would probably top out at about £1500, possibly £2k selling it on (I’ve been looking within the industry selling sites at what it was worth)


I’m just about to head out to my next appointments, should be done by 3.30pm.
Would it be ok if I emailed you to set up a telephone call please?
Doesn’t have to be today, but I think if you had more clarity than I’ve included on the post, you could confirm my best option?

 

[japancool]

How much are your total debts?

 

[ChrisCallaghan]

This is correct Chris.
It was 2 separate loans, and 2 new business bank accounts had to be opened for the funds to be deposited into.

Bankruptcy is looking the better option as I’m in rented accommodation with very little in the way of assets
A 14 yr old car that is needed to do business 3 (and 2) in (probaby get 3k if I had to sell, but that wouldn’t cover the cost of a 2nd hand replacement vehicle for business 3)
Equipment needed to do business 2, would probably top out at about £1500, possibly £2k selling it on (I’ve been looking within the industry selling sites at what it was worth)


I’m just about to head out to my next appointments, should be done by 3.30pm.
Would it be ok if I emailed you to set up a telephone call please?
Doesn’t have to be today, but I think if you had more clarity than I’ve included on the post, you could confirm my best option?

Hi,

I won't be free for a phone call today, but direct message or email me and I'll be happy to organise a call with you to go through things. It sounds like bankruptcy may be appropriate as Business DebtLine have advised, but happy to offer a 2nd opinion.

 

[japancool]

If the total debts are under £50,000, perhaps a DRO would be an option, but definitely take advice from an insolvency professional.

 

[Gyumri]

I’m now looking at £50k of debt and bankruptcy.

If I started the process, would I let everyone know I’m starting bankruptcy or do I have to wait to inform them till I’ve paid in full?

There seems no reason at present to file for bankruptcy and give yourself an added headache even if you could afford to go down that route.

Which creditor in their right mind is going to petition for your bankruptcy, as you have no assets? It would do them no good and simply throw good money after bad money.

Of course bankruptcy would bring you instant relief and release you from all your debts but on the other hand you may wish to seek an arrangement with your creditors to postpone or reduce repayments overtime until your situation improves.

Of course if any of your creditors wish to sue you to obtain a court judgement then at that stage you can opt for bankruptcy.

 

[ChrisCallaghan]

@Gyumri though I appreciate your thought process, what would suggest OP does instead?

They have stated they have circa £50k of personal debt, of which only £8.5k and £15k are BBLs. They have also already stressed how much worry the debts are causing them. If they were to not go down the route of some process, e.g. bankruptcy, IVA & DRO, or could not come to an agreement with the creditors, then they would likely be facing endless debt collection activities, such as phone calls, CCJs, bailiffs etc. As you say, potentially no creditor will be willing to bankrupt them, so debt collection activities could go on for quite some time.

 

[brucegreig]

Please, if anyone has any advice, I’ll gladly hear it because right now, I’ve got nothing but fear controlling my head

I can't add anything to what others have said, but for this particular issue consider setting aside some time to read or listen to "Happy" by Derren Brown (yes, that Derren Brown, the illusionist / hypnotist guy). It is a very readable modern take on the Stoic philosophy of Epictetus and Marcus Aurelius. People have found it transformational in helping them deal with extreme life events like this.

 

[japancool]

then they would likely be facing endless debt collection activities, such as phone calls, CCJs, bailiffs etc. As you say, potentially no creditor will be willing to bankrupt them, so debt collection activities could go on for quite some time.

I went through all of this. It resulted in my kidneys failing and losing my leg.

So don't put yourself through it. Find a solution, and there is plenty of help out there.

All I would say is don't go for one of these IVA factories masquerading as debt charities. StepChange and Business Debtline are your lifelines.

 

[ChrisCallaghan]

I went through all of this. It resulted in my kidneys failing and losing my leg.

So sorry, never realised you've directly gone through this yourself, but explains how insightful your comments on insolvency posts tend to be.

 

[japancool]

So sorry, never realised you've directly gone through this yourself, but explains how insightful your comments on insolvency posts tend to be.

Thank you.

I learned the *very* hard way why you should never try to borrow your way out of trouble!

 

[In a mess]

I went through all of this. It resulted in my kidneys failing and losing my leg.

So don't put yourself through it. Find a solution, and there is plenty of help out there.

All I would say is don't go for one of these IVA factories masquerading as debt charities. StepChange and Business Debtline are your lifelines.

So sorry to hear this, that is an awful thing to have to go through on top of everything else, but thank you for your advice/support

The StepChange website infers they’re not really able to help when it comes to sole trader issues, so BDL have been my ‘go to’ so far.
They have been so helpful, and have sent me a lot of ‘bumpf’ to read, but when the guy pointed out towards the end of our call yesterday that I might have a larger problem as a result of the BBL’s, nothing seemed to go in after that bombshell

I’m planning on reading through it all over the next few days

 

[In a mess]

There seems no reason at present to file for bankruptcy and give yourself an added headache even if you could afford to go down that route.

Which creditor in their right mind is going to petition for your bankruptcy, as you have no assets? It would do them no good and simply throw good money after bad money.

Of course bankruptcy would bring you instant relief and release you from all your debts but on the other hand you may wish to seek an arrangement with your creditors to postpone or reduce repayments overtime until your situation improves.

Of course if any of your creditors wish to sue you to obtain a court judgement then at that stage you can opt for bankruptcy.

Thanks for your input, and believe me when I say, this isn’t an easy choice/decision, nor is it something I want to do at my stage in life, but I also cannot physically or mentally continue with the way things are, and have been.

 

[Gyumri]

@Gyumri though I appreciate your thought process, what would suggest OP does instead?

I would do exactly as I suggested. Be open with your creditors whoever they may be. Clarify your position. Offer them something as even a crust is better than no loaf at all.

In the meantime the OP can then focus on digging himself out of the hole.

If any of the creditors step out of line and want to begin court proceedings to claim their debt then a heart to heart conversation should cause them to think twice - as there is no money in the kitty.
Anyway a court judgment will take some time to come to fruition.

also cannot physically or mentally continue with the way things are.

As the previous posters have said there is nothing inherently wrong in obtaining two BBLs and so the OP has done nothing untoward.

But I would simply contact the bank and clarify the position.

Even if the OP has done something wrong - by for example failing to disclose his existing BBL, I am not sure whether that would warrant a prosecution by any entity.

 

[japancool]

Personally, I wouldn't do this.

Unless you get a full and final settlement with the creditors, the debt remains and you leave yourself open to future recovery attempts, if your situation improves, which hopefully it will. If they get a judgement, they have 6 years to enforce it. If your situation has improved by then, you could very well be on the receiving end of recovery action. Do you really want all of this potentially coming back to bite you in 6 years' time?

Bankruptcy, or other form of insolvency draws a line underneath it and allows you to start afresh. You'll have restrictions for a while and things may well be tough, but you won't have to live in fear of the bailiffs knocking at the door.

This doesn't constitute advice, and may not be appropriate for the OP. It's simply my opinion.

 

[Gyumri]

Bankruptcy, or other form of insolvency draws a line underneath it and allows you to start afresh. You'll have restrictions for a while and things may well be tough, but you won't have to live in fear of the bailiffs knocking at the door.

That is quite correct and it's a personal choice and certainly if a creditor is not playing ball and does issue proceedings then at that point one would put up the white flag and apply for bankruptcy which can be done online.
Trade creditors are likely to take a pragmatic view however but if they do pull the trigger then they can say goodbye to any chance of getting what they are owed.

The Bailiffs stage can only arise following a judgment order so there is no necessity to file for bankruptcy at this point in time.

The purpose of waiting and seeing is because the OP can carry on earning a living in the meantime as he is doing without adding the trustee in bankruptcy to his list of woes.

 

[In a mess]

Hi,

I won't be free for a phone call today, but direct message or email me and I'll be happy to organise a call with you to go through things. It sounds like bankruptcy may be appropriate as Business DebtLine have advised, but happy to offer a 2nd opinion.

Thank you, I’ve emailed you

 

[JEREMY HAWKE]

Bankruptcy, or other form of insolvency draws a line underneath it and allows you to start afresh. You'll have restrictions for a while and things may well be tough, but you won't have to live in fear of the bailiffs knocking at the door.

We spoke on this subject a few times before
It is wise follow your advice and avoid trouble but you could ride it out for 10 years and it might fall into nowhere
If you like brawling in the street with some punk who could only get a bailiffs job then it might be a bit of fun for you. Just get yourself in shape for some smoke
There is literally a lot of bank debt that has fallen into status Barred simply because the creditor was unwilling to co cooperate

 

[Mark T Jones]

We spoke on this subject a few times before
It is wise follow your advice and avoid trouble but you could ride it out for 10 years and it might fall into nowhere
If you like brawling in the street with some punk who could only get a bailiffs job then it might be a bit of fun for you. Just get yourself in shape for some smoke
There is literally a lot of bank debt that has fallen into status Barred simply because the creditor was unwilling to co cooperate

There is quite a lot of bollox talked about debt collection - and bear in mind that what you see on TV is edited highlights - the juicy stuff.

Having done door-knock collections early in my career I will say that by far the most common reaction is fear and anxiety (which sometimes manifests itself in aggression).

There is of course a tough minority who either know the game and will play the rules, or who are prepared to punch their way out of trouble - I'd suggest between them they are less than 20%

 

[JEREMY HAWKE]

There is of course a tough minority who either know the game and will play the rules, or who are prepared to punch their way out of trouble - I'd suggest between them they are less than 20%

When I was young I would have enjoyed dealing with this I loved a bit of heat and believed I was invincible

These days I cant be bothered with it

 

[japancool]

There is quite a lot of bollox talked about debt collection - and bear in mind that what you see on TV is edited highlights - the juicy stuff.

Well - I had one debt collector doing his best to imply that I would be arrested if I didn't pay him immediately, and then later, when I was seriously ill in hospital, trying to pressurise a friend of mine, whose phone I had earlier simply borrowed to call him, that he was the one who had to pay the debt. So I have my doubts.

In general, I object to debt collectors pressurising people to borrow money from other people to pay their debts. That's unfair on the person being asked for money, and it's simply shifting the debt away from one person to another, who had nothing to do with it.

Or, when someone who is subject to debt collection because they've signed a personal guarantee with absolutely no idea what that meant. I've known at least one person who this happened to, so it does happen.

Of course, there are people who can pay but won't. But for people who can't, and don't know how or where to get help, it can make things considerably worse, both financially and mental-health wise.

 

[Mark T Jones]

Well - I had one debt collector doing his best to imply that I would be arrested if I didn't pay him immediately, and then later, when I was seriously ill in hospital, trying to pressurise a friend of mine, whose phone I had earlier simply borrowed to call him, that he was the one who had to pay the debt. So I have my doubts.

In general, I object to debt collectors pressurising people to borrow money from other people to pay their debts. That's unfair on the person being asked for money, and it's simply shifting the debt away from one person to another, who had nothing to do with it.

Or, when someone who is subject to debt collection because they've signed a personal guarantee with absolutely no idea what that meant. I've known at least one person who this happened to, so it does happen.

Of course, there are people who can pay but won't. But for people who can't, and don't know how or where to get help, it can make things considerably worse, both financially and mental-health wise.

I can see both sides of this quite clearly.

For every debtor there is a creditor - or multiple creditors. Not just big money machines but often small businesses or individuals who actually need the money.

I'm sure there are rogue collectors, but with bodycams and pretty strict rules from FCA they are getting fewer

 

[japancool]

I can see both sides of this quite clearly.

For every debtor there is a creditor - or multiple creditors. Not just big money machines but often small businesses or individuals who actually need the money.

I'm sure there are rogue collectors, but with bodycams and pretty strict rules from FCA they are getting fewer

The worst offenders for aggressive debt collection seems to be local councils for CT debt. Unfortunately, that tends to affect the most vulnerable in society.

 

[sparksy68]

We fell into this trap with a BBL taken out in lockdown for our original soul trader company so it's classes as a personal debt. The Bank passed it onto a 3rd party debt agency and after talks we agreed a payment plan. About 31k of debt and they settled on £15 a month. No bankruptcy , your credit history gets wiped after 7 years .

 

[ChrisCallaghan]

your credit history gets wiped after 7 years

Don't mean to be pedantic, but not for ongoing debts. I'm not saying it will necessarily be a negative, but the BBL will likely show on your credit score as an active loan for the duration of your repayment plan.

 

[sparksy68]

This is true all scenarios are not great but so will going bankrupt, it's just your circumstances and what you may loose in a bankruptcy case.

 

[Lisa Thomas]

TLDR so didn't read all the replies.

If it hasn't been suggested then consider speaking to Stepchange on your options. They may not just be limited to Bankruptcy.

StepChange Debt Charity. Free Expert Debt Help & Advice