Just started spongebob plan...need advice on bank overdraft

Discussion in 'Insolvency' started by Diane Evans, Apr 24, 2018.

  1. Diane Evans

    Diane Evans UKBF Newcomer Free Member

    3 0
    Hi, Our small family company has finally come to an end mainly due to online competition and loss of contracts from councils and schools due to budget cuts and closing of departments.

    We have sent letters to all creditors, mainly trade and amounting to no more than 5K. we do not owe HMRC or VAT. We have a bank overdraft of 25K which is unsecured and funding circle of 18K which has personal guarantee by director, I know this will be trouble, but the director lives in rented accommodation and has no assets.
    No directors loans or anything like that, in fact the company owes us personal money. lots !
    We had a machine on lease and instructed the lease company to collect.
    Question? Do we send the letter to the bank as well as the other creditors.
    Have we done everything correct so far, can anyone help please.
    Thanks
     
    Posted: Apr 24, 2018 By: Diane Evans Member since: Apr 24, 2018
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

    13,174 1,441
    Yes you send a letter to the bank.

    Does the overdraft have a personal guarantee?
     
    Posted: Apr 24, 2018 By: Mr D Member since: Feb 12, 2017
    #2
  3. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    2,819 332
    Yes ALL creditors must be notified. Have final returns been submitted to HMRC to cessation? I would send them notice anyway, as belt and braces.
     
    Posted: Apr 24, 2018 By: Lisa Thomas Member since: Apr 20, 2015
    #3
  4. Phil Meekin

    Phil Meekin UKBF Contributor Full Member

    81 14
    Hi Diane
    As Mr D asked, I also wonder if there is a personal guarantee? If you are not sure it will be on the bank facility letter for the overdraft. If you don't have a copy, the bank will supply you with one on request.
    If the company has no assets and cannot repay what is owing, then the lenders will usually demand repayment from the guarantor(s). But if the guarantor doesn't have any significant assets (such as a house) the lender has few options to recover the money.
     
    Posted: Apr 24, 2018 By: Phil Meekin Member since: Apr 10, 2018
    #4
  5. kulture

    kulture UKBF Legend Staff Member

    7,802 2,121
    As above, you should send the letter to everyone including the bank. Whilst it is a requirement to pay each creditor in proportion to what you owe them, it is likely that as soon as the bank gets the letter they will freeze your accounts and effectively give themselves preferential treatment. Likewise any final income paid into the bank will also go their way. People who have a personal guarantee with the bank tend to like this consequence. The other creditors not so much. Unless you pay for an use an Insolvency Practitioner it is difficult to avoid this.
     
    Posted: Apr 24, 2018 By: kulture Member since: Aug 11, 2007
    #5
  6. Diane Evans

    Diane Evans UKBF Newcomer Free Member

    3 0
    Ok. Thank you the info. The bank has no personal guarantee. It is unsecured
    How can we tell HMRC? Is there a form online
    Thanks
     
    Posted: Apr 24, 2018 By: Diane Evans Member since: Apr 24, 2018
    #6
  7. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

    5,072 1,442
    How on earth did a small family company manage to get a £25,000 unsecured overdraft :D
     
    Posted: Apr 24, 2018 By: Ian J Member since: Nov 6, 2004
    #7
  8. Diane Evans

    Diane Evans UKBF Newcomer Free Member

    3 0
    It was not always a small company, it has been going for 50 years and at one time had a large turnover and lots of staff, please do not judge, we have been struggling along since the recession and just trading water, we had plans to expand but these, again fell through.
     
    Posted: Apr 24, 2018 By: Diane Evans Member since: Apr 24, 2018
    #8
  9. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

    5,072 1,442
    I wasn't judging. I thought that maybe you had a secret method of getting overdrafts that you could bottle and sell :)
     
    Posted: Apr 24, 2018 By: Ian J Member since: Nov 6, 2004
    #9
  10. Scalloway

    Scalloway UKBF Legend Free Member

    14,605 3,121
    Posted: Apr 24, 2018 By: Scalloway Member since: Jun 6, 2010
    #10
  11. Anonanon123

    Anonanon123 UKBF Contributor Free Member

    38 0
    Hi Diane, are you able to give an update on what happened with your overdraft? As I am in a similar position.
     
    Posted: Feb 20, 2019 By: Anonanon123 Member since: Feb 7, 2019
    #11
  12. RobinBHM

    RobinBHM UKBF Newcomer Free Member

    19 0
    Is is possible other creditors can force the bank to hand over funds that get paid in, increasing the overdraft. It seems strange because that is the banks money and would force them to try and collect through the personal guarantee.

    I ask because I have some customers that are paying final balances on jobs, which will reduce the overdraft. I am in process of typing up spongbob letters to send out -in the next day or so.
     
    Posted: Apr 17, 2019 at 4:43 PM By: RobinBHM Member since: Apr 14, 2012
    #12