Overdraft guarantee on insolvent company

[crphillips]

Hi there,

We recently ceased trading under a ltc company. Unfortunately we had an overdraft with the bank for 40k that we personally guaranteed.

What is the banks usual approach on this kind of thing? We are owed in a fair bit of money and should have around 13k left owing on the overdraft by the time we've got the money in from the companies that owe us. Interest is being added onto this figure though.

Where do we stand on repaying the overdraft?

Due to closing the buisiness we already have to find another 30k per year to repay family debts that we borrowed to buy the business. We have another business that makes money that i run as a sole trader and i've set up another van and got back on the tools to pay back the family.

How will the bank expect the overdraft to be repaid? Will they go in guns blazing and want it repaid over an unrealistic short period or will they be open to negotiation and accept something £350 per month?

What are the options for personal bankruptcy? I own a house we don't live in, and rent the one we do live in. I have two vans on finance that we use for work and other than that have no major possesions of any real value. Would they be able to take the work vans and tools used for work or do they have to leave these alone?

How long does bankruptcy tarnish your credit rating for? How long before being able to get finance or a contract mobile phone?

Any help would be much appreciated as we have to make up our minds on how we are goin to get through this.

Cheers,
Chris

 

Chris

From what you have put here, bankruptcy seems an extreme and unnecessary option.

First, put a cap on your bank liability. Contact them let them know the situation.

In banking terms, 13K isn't a lot of money and the evidence I am hearing is that banks are open to sensible offers.

If there is any chance that you can raise cash, I would be inclined to gambit a 'full and final' offer of about 15% of the outstandings. They probably won't accept, but negotiation should be possible.

If you have to repay on the drip, go with a sensible monthly offer supported by a personal means statement. Make it clear that the amount to be repaid is the balance as of today and that it doesn't accrue interest or charges (except in the case of non-payment!)

My gut feel is that you will reach an agreement (assuming there aren't loads of other things that aren't in your thread); however, if you can't reach agreement, you would almost certainly benefit from an IVA, rather than bankruptcy. Go to your CAB, NOT some dodgy IVA operator advertising in The Sun!!

Hope it helps.

Mark

 

[crphillips]

Sounds like good advice......bankruptcy is unecessary as we will still need to pay the family debt back.

I'll give the bank a call to see if we can get the interest stopped and make arrangements to pay back a percentage of the outstanding debt......other than the overdraft we do not owe anything else to the bank.

Many thanks for taking the time to respond.

 

[KM-Tiger]

Experience of a friend who was in a similar predicament (though more money) was that they would negotiate, and the overdraft was converted to a loan with affordable repayments. He was able to fight off the bank's attempts to secure the loan on his house.

But don't lose sight of the cash settlement possibility, they can only say no to any offer you make and it won't weaken your position.

If you have equity in the house you own, then surely you are a long way from thinking of bankruptcy.

 

[Rob]

Good advice above - for 13k the bank are very unlikey to make a move against you unless you clam up and say nothing. In situations like this the temptation is to bury heads and hope it all goes away, which of course it never does.

You seem to want to co-operate and that's the key here.

Put your income and expenditure down on paper and offer what you can realistic afford to pay (will not be in the bank's interest to make you pay an unrealistic amount because it just creates another problem); resist putting the house up as additional security (they are bound to ask) and request that interest is suspended and not accured to the debt.

No reason why you should not get out of this trouble free.

 

Chris

From what you have put here, bankruptcy seems an extreme and unnecessary option.

First, put a cap on your bank liability. Contact them let them know the situation.

In banking terms, 13K isn't a lot of money and the evidence I am hearing is that banks are open to sensible offers.

If there is any chance that you can raise cash, I would be inclined to gambit a 'full and final' offer of about 15% of the outstandings. They probably won't accept, but negotiation should be possible.

If you have to repay on the drip, go with a sensible monthly offer supported by a personal means statement. Make it clear that the amount to be repaid is the balance as of today and that it doesn't accrue interest or charges (except in the case of non-payment!)

My gut feel is that you will reach an agreement (assuming there aren't loads of other things that aren't in your thread); however, if you can't reach agreement, you would almost certainly benefit from an IVA, rather than bankruptcy. Go to your CAB, NOT some dodgy IVA operator advertising in The Sun!!

Hope it helps.

Mark

Interesting Mark as to why you'd suggest an IVA as opposed to bankruptcy. Also, Citizens Advice Bureau are fantastic if you want textbook advice

As you are aware the bank will act upon the personal guarantee - you could offer a full and final settlement but they are highly unlikely to accept such as small percentage as 15%.

Do you have other personal debts? Or will this be the only debt (other than your mortgage).

Bankruptcy stays on your credit file for 6 years after you are discharged BUT you will have to declare it on any credit applications where the question is asked.

An IVA normally lasts up to 5 years BUT this will stay on your credit file for 6 years after the IVA has finished.

Both have a negative effect on your credit file.

 

[yorkshirejames]

Stating the obvious - consider selling the property you own (do you own solely or jointly?). At a fair price how much money would be left over once the mortgage on that was settled? If this would be enough to pay off both the PG and your own borrowings, then it is a no-brainer. If however you are in negative equity it may be that bankruptcy is worth a look.

 

[Matt63]

Hi there,
How will the bank expect the overdraft to be repaid? Will they go in guns blazing and want it repaid over an unrealistic short period or will they be open to negotiation and accept something £350 per month?

In the end if you make them a sensible offer, they will probably accept. If you have good personal standing, they should be be able to convert it into a personal loan. Be wary though of arrangement fees and high interest rates, and be prepared to say no to their first offer. Go to the Financial Ombudsman if you think they are being unreasonable.

 

[Gasey But Good]

Hi, I'm new to the site and very pleased to see this post as I too am in the same position. I owe about 11K on my Natwest business overdraft. I don't have the money but have tried negoiating and have offered up to £3,500 as a full and final settlement. The bank have refuse and we have been going back and too for nearly a year.

I've tried explaining numerous times I have no money but they are not listening. They want me to go in and give them my income and expenditure but i am not prepared to do this.

I am being handled by the personal debt team, i've been told by an ex natwest employ that if the business team deal with it, they are professional and will sort a sensible deal. It appears the personal team aren't so skilled!! I even had one threatening me with court action and losing my home. When i complained and asked for a recording of the conversation i heard nothing for a while and then they came back and said they don't record conversations.

The latest letter they have given me gives me until monday to make an another offer or they pass the debt to either a solicitor or debt recovery agency.

PLEASE CAN SOMEONE OFFER ADVICE AS I'VE RUN OUT OF IDEAS I'VE TRIED TO BE HELPFUL AND TRUTHFUL THROUGHOUT.

 

Hi, I'm new to the site and very pleased to see this post as I too am in the same position. I owe about 11K on my Natwest business overdraft. I don't have the money but have tried negoiating and have offered up to £3,500 as a full and final settlement. The bank have refuse and we have been going back and too for nearly a year.

I've tried explaining numerous times I have no money but they are not listening. They want me to go in and give them my income and expenditure but i am not prepared to do this.

I am being handled by the personal debt team, i've been told by an ex natwest employ that if the business team deal with it, they are professional and will sort a sensible deal. It appears the personal team aren't so skilled!! I even had one threatening me with court action and losing my home. When i complained and asked for a recording of the conversation i heard nothing for a while and then they came back and said they don't record conversations.

The latest letter they have given me gives me until monday to make an another offer or they pass the debt to either a solicitor or debt recovery agency.

PLEASE CAN SOMEONE OFFER ADVICE AS I'VE RUN OUT OF IDEAS I'VE TRIED TO BE HELPFUL AND TRUTHFUL THROUGHOUT.

In my experience companies will only accept full & final settlement offers after fully assesing your circumstances and if you do not have an income that will support a monthly payment.

Natwest are usually good at accepting and its not an unreasonable offer **IF** your income and expenditure would not support repaying the debt at a monthly figure. We have just dealt with a client who repayed with a similar dividend (32.5p per £1) and Natwest, HSBC and MBMA accepted pretty swiftly - the only one we are struggling with is Halifax and that keeps getting passed to different DCA.

Do you have equity in your property? Other debts? If you don't have equity and have other debts and you want to tackle this on your own then i would simply say to them that your offer is all you can afford and it is much more than they would get if you entered into voluntary bankruptcy.

If you want more detailed advice then i am more than happy to discuss with you - obviously it is difficult to advise people from skelton information.

Hope this helps

 

[crphillips]

Thanks for the advice guys.....wll try and cut a deal.

As for the other guy in similar situation.......i don't think you can expect them to take a 3.5k offer if they don't know your incomings and outgoings.....surely you'll have to tell them before they'll consider anything......you could be a millionaire trying to pull a fast one on the bank.

 

[Matt63]

They want me to go in and give them my income and expenditure but i am not prepared to do this.

I'm afraid to say that this is the root of the your problem. You need to be open and honest in all these discussions and be able to prove any figures you give them. If you do that, you will be able to negotiate a settlement, although probably not as good as the one you are hoping for.

 

Thanks for the advice guys.....wll try and cut a deal.

As for the other guy in similar situation.......i don't think you can expect them to take a 3.5k offer if they don't know your incomings and outgoings.....surely you'll have to tell them before they'll consider anything......you could be a millionaire trying to pull a fast one on the bank.

Yeah, they'll also want to know why aren't you able to make monthly payments i.e. you are not working, on benefits, illness etc

 

I'm afraid to say that this is the root of the your problem. You need to be open and honest in all these discussions and be able to prove any figures you give them. If you do that, you will be able to negotiate a settlement, although probably not as good as the one you are hoping for.

All depends on circumstances as i said, one of our clients this week have been accepted by 3 major companies for 32.5p per £1 dividend. His income cannot support a monthly payment plan. One thing to note though - the bank won't accept it on the spot. It will get sent to their in-house debt collectors first, they are always more willing to negotiate!

 

I've tried explaining numerous times I have no money but they are not listening. They want me to go in and give them my income and expenditure but i am not prepared to do this.


PLEASE CAN SOMEONE OFFER ADVICE AS I'VE RUN OUT OF IDEAS I'VE TRIED TO BE HELPFUL AND TRUTHFUL THROUGHOUT.

Why are you not prepared to give income & expenditure? That seems a reasonable request to me!

You haven't been entirely helpful, have you?

 

[Gasey But Good]

I have been honest as I've told them what I can afford (as I have been through with my financial advisor & a meeting I had with a debt consellor). The reasons I don't wish to sit down with a member of the bank and produce all my bills and income are as follows:

1. Before my business came to an end my account manager had not contacted in over 3 months. So I had lost confidence
2. After informing the bank I had ceased trading a month later I received a letter from them informing me they were happy to continue with my overdraft for another year (and they billed me)!!
3. As mentioned in earlier post - I had an operator be rude and threaten over the phone.

All of the above did not fill me with any confidence to be sat in a room with them and resolve the issue.

As it now happens I have managed to get through to somebody who listened and they have accepted a monthly payment I can afford (which is the same as I offerd 4 months ago).

 

[Videoguy]

I am in a similar (although not quite as bad) situation.

I have a company that has never traded. I started it for a specific project that (in the end) did not happen. When I opened the company bank account with Barclays I was talked into subscribing to their Business Essentials package which had a whole lot of things I thought would be useful if the project went ahead. As the company wasn't trading, I'd been paying in cash to cover the subscription fee; essentially paying the fee personally. When the project didn't go ahead, I decided to keep the company going as there was another project in the pipeline that I could use it for, but I telephoned Barclays and told them to cancel the subscription. To cut a long story short, they didn't but I thought they had.

This other project has fallen through, so I've decided to shut the company down, only to discover it now has an "unauthorised overdraft" of over £500. I appreciate that's not a lot of money in banking terms, but I don't see why I should personally pay for something I didn't use and had told them I no longer wanted. I've looked through all the paperwork, and I didn't sign any personal guarantee as the company didn't officially ask for an overdraft.

Granted, I took my eye off the ball with this one, but other than pay it myself when I close the company down what can I do? Any advice before I talk to Barclays would be appreciated as I've not found them very helpful in the past.

 

[Billmccallum]

I am in a similar (although not quite as bad) situation.

I have a company that has never traded. I started it for a specific project that (in the end) did not happen. When I opened the company bank account with Barclays I was talked into subscribing to their Business Essentials package which had a whole lot of things I thought would be useful if the project went ahead. As the company wasn't trading, I'd been paying in cash to cover the subscription fee; essentially paying the fee personally. When the project didn't go ahead, I decided to keep the company going as there was another project in the pipeline that I could use it for, but I telephoned Barclays and told them to cancel the subscription. To cut a long story short, they didn't but I thought they had.

This other project has fallen through, so I've decided to shut the company down, only to discover it now has an "unauthorised overdraft" of over £500. I appreciate that's not a lot of money in banking terms, but I don't see why I should personally pay for something I didn't use and had told them I no longer wanted. I've looked through all the paperwork, and I didn't sign any personal guarantee as the company didn't officially ask for an overdraft.

Granted, I took my eye off the ball with this one, but other than pay it myself when I close the company down what can I do? Any advice before I talk to Barclays would be appreciated as I've not found them very helpful in the past.

"I telephoned Barclays and told them to cancel the subscription." I know this will sound harsh, but in dealing with banks, I always put it in writing just in case something like this happens (I recently travelled 700 miles just to cancel six direct debit payments to ensure that my signature was on a piece of paper at the bank).

Essentially, you can't prove that you cancelled the subscrition and you were happy to pay for something you did'nt need when it suited you.

You can try and fight the charges, but I suspect you can't win this one, best to pay the £500 and keep a good credit record.

 

[Videoguy]

I suspected that would probably be the case, but I thought it wouldn't hurt to ask around. So much for limited liability.

 

[Billmccallum]

I suspected that would probably be the case, but I thought it wouldn't hurt to ask around. So much for limited liability.

If the company never traded, then it was simply you having a bank account in a different name, you can't rely on the limited liability if you don't operate the company.

 

[GRDCredit]

Sorry - if I have misread this.

Videoguy - you have a bank account in the name of a limited company which now has an overdraft of £500. The company is not going to trade.

If this is the case I cannot see that you are personally liable in any way for this debt so let the bank whistle! Whether you did or did not cancel the contract is irrelevant.

Unless that is you want to maintain a good credit record for a company that will be closed down!

 

[Angied]

I guaranteed my then Husbands business overdraft of £5000 in the year 2000. I then signed an overdraft agreement with the same bank 6 months later for £10,00.00, (none of which I could remember until I asked the bank for copies and realised that I had not guarnateed £10.000 but £15,000) My Husband and I divorced 4 years ago and last year the bank sent me a letter stating that they wanted £17,500 from me to be paid within 7 days. When I called the bank they explained that my ex Husband had not been paying off his overdraft and that it had exceeded the £15,000 limit. Since then he has reduced the limit to £10,253.00. HMRC has now called for compulsory liquidation (he owes money everywhere). The bank contacted me last week and demanded the full amount to be paid within 18 days. I take home £1,153.00 per month and have a mortgage to pay, I simply cannot afford the amount, I also have other financial commitments as well as dependants (not his children), I receive no financial help from my former Husband as it was agreed that I raise £25,000 from a remortgage as settlement for my keeping the home, I also paid off £7,500 personal loan in which I stupidly took out before we separated and divorced to help his business financially as he could not get any further loans/overdrafts, he never paid me back one penny of this. He has refused to pay any further payments to the bank for the business overdraft. I do not know what to do. Can anyone advise?

 

[yorkshirejames]

I guaranteed my then Husbands business overdraft of £5000 in the year 2000. I then signed an overdraft agreement with the same bank 6 months later for £10,00.00, (none of which I could remember until I asked the bank for copies and realised that I had not guarnateed £10.000 but £15,000) My Husband and I divorced 4 years ago and last year the bank sent me a letter stating that they wanted £17,500 from me to be paid within 7 days. When I called the bank they explained that my ex Husband had not been paying off his overdraft and that it had exceeded the £15,000 limit. Since then he has reduced the limit to £10,253.00. HMRC has now called for compulsory liquidation (he owes money everywhere). The bank contacted me last week and demanded the full amount to be paid within 18 days. I take home £1,153.00 per month and have a mortgage to pay, I simply cannot afford the amount, I also have other financial commitments as well as dependants (not his children), I receive no financial help from my former Husband as it was agreed that I raise £25,000 from a remortgage as settlement for my keeping the home, I also paid off £7,500 personal loan in which I stupidly took out before we separated and divorced to help his business financially as he could not get any further loans/overdrafts, he never paid me back one penny of this. He has refused to pay any further payments to the bank for the business overdraft. I do not know what to do. Can anyone advise?

Are you divorced? Was there anything in your divorce contract that covered this issue? If you used a solicitor and they didn't raise it, then you may have a claim against them.

Sadly though, on the face of it the banks' claim may be valid. It could be that your best hope is verbiage technicalities (which if this was 10 years ago is surely worth a shot).