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

[Diane Evans]

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

 

[Mr D]

Yes you send a letter to the bank.

Does the overdraft have a personal guarantee?

 

[Lisa Thomas]

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.

 

[ChrisCallaghan]

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.

 

[kulture]

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.

 

[Diane Evans]

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

 

[Ian J]

The bank has no personal guarantee. It is unsecured

How on earth did a small family company manage to get a £25,000 unsecured overdraft

 

[Diane Evans]

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.

 

[Ian J]

please do not judge, we have been struggling along since the recession and just trading water.

I wasn't judging. I thought that maybe you had a secret method of getting overdrafts that you could bottle and sell

 

[Scalloway]

How can we tell HMRC?

HMRC contact details are here.

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/corporation-tax-enquiries

 

[Anonanon123]

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

Hi Diane, are you able to give an update on what happened with your overdraft? As I am in a similar position.

 

[RobinBHM]

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.

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.