Partnership Bank Debts

[susan1234]

Hi all

I am new on here. Please be gentle with me. In a desperate situation and in desperate need of some advice. My mind is everywhere at the moment but will try to explained fully my problems.

Just recently closed down our business. Ceased trading after nearly 16 years . Its a partnership or rather was a partnership and that is the main problem to my problems. Really did not expected it but the day we ceased trading my partner basically walked away and wanted nothing to do with the business.......leaving me to deal with a real mess of everything and the partnership debts. Because she has no assets when she she sold her house 3 years ago to settle her personal debts and is now renting, I know I am in a really disadvantage position. Whereas, I still own my property with a sizeable equity. She has avoided all communication and may have moved again.

After getting over her treachery and shock of it all and with very limited funds raised through friends and family, I have slowly been trying to sort everything out. Managed after much negotiation to settle the debts with various suppliers. After returning the remaining stock to them, I settled only 50% of the debts owed. Result is I am no longer liable ( all this is in writing ) and the creditors retain the rights to pursue my ex partner for the other 50%.

Then there is the HMRC , the VAT and other many various matters I suddenly I had to deal with. It has been very stressful for me and I do not know how much more I can cope especially the thought I might lose my house. I have 2 young children and I really cannot and do not want to sell my house

My problem now, probably the biggest problem is the unsecured overdraft and loan debt with Barclays which I am hoping to find some advice here . Its about £26k which I do not have. I wrote to them enclosing a financial disclosure,explaining my situation I am in and also that I am in a low wage employment.I offered them £7700 on a pro rata basis. Unfortunately , this was rejected

This is the extracts from the Barclays reply........"In your letter the sum of £7700 is a pro rata offer but you do not say much you are raising to settle your various debts or whether your other creditors are prepared to accept a pro rata settlement. We have not received full financial disclosure from you to include full details of your property and our records suggest that you have substantial equity in your property. We would be prepared to consider a greatly enhanced offer of settlement but if this is not forthcoming......."

Do you think I have messed it up with the offer? Any suggestion/ advice on how to reply. Do I disclose full details of my property? Any idea what enhanced offer they looking for ? Do you think I can come to an arrangement with them like I did with my suppliers and that Barclays retain the right to pursue my ex partner?

Thank you ........I would be very grateful for any suggestion or advice

 

[businessfunding]

Personally I wouldn't improve the offer at this point

I would provide an asset & liability statement and cashflow statement based on the offers you have made to creditors

If others have agreed, highlight this.

All the time you are talking, things are going well.

 

[susan1234]

Thanks kickstatbtm
The other business creditors were my suppliers who I have settled.Apart from the VAT, is only this partnership Barclays debt left. Maybe I am feeling spent from it all, am just worried on how I should reply to them without making a mistake. Also, I have personal credit cards debts which I am trying to arrange a dmp with them.
Regards

 

[doi_swilkinson]

Hi
Is it a ltd co

 

[Alan R Price]

Thanks kickstatbtm
The other business creditors were my suppliers who I have settled.Apart from the VAT, is only this partnership Barclays debt left. Maybe I am feeling spent from it all, am just worried on how I should reply to them without making a mistake. Also, I have personal credit cards debts which I am trying to arrange a dmp with them.
Regards

The residual partnership debts, the Barclays debt and the credit cards all rank equally. To try to deal with them piecemeal does not make any sense to me because if you come to an arrangement with one, another one might say "no", leaving you up a gum tree. In my view, any solution ought to be one that encompasses all your debts. A DMP is not, in my view, appropriate. DMPs are only suitable where there are temporary problems, for example caused by redundancy but there is light at the end of the tunnel and you just need some respite for a few months. DMPs do not usually provide for debts to be reduced and although they offer temporary respite, all they really do is push dealing with the core problems back.

There is little doubt in my mind that Barclays will either sue you for the debt so it can pursue a charging order over your property, or perhaps even make you bankrupt. If the VAT is not paid there is a danger HMRC will pursue you into bankruptcy. And what about your next instalment of self-assessment tax? Let us be clear about this, if you are made bankrupt, you will lose your house unless somebody is able to come up with an offer to buy your share from the trustee. And selling your house may be the only way for you actually to avoid bankruptcy, much as this might be against your wishes. Sorry to be brutal but that is the position.

There may be an alternative solution however: I recommend that you look into proposing an individual voluntary arrangement with your creditors. An IVA is a formal agreement that binds all your creditors. It is an alternative to bankruptcy and may help you to keep your house. Have a look at this link. It may not be possible to save the house but even if not, an IVA could provide you with up to four years to come up with plans to deal with the problem.

As regards the partnership, cessation accounts should be drawn up, showing the final balance sheet and partners' capital accounts. Yours will be credited with any money you have paid to the partnership's creditors and in theory, your partner is obliged to contribute to such an extent that your respective capital accounts are equalised. Of course, if she has no assets this is a moot point. Remember, you are both liable for all the partnership debts, not just half, so you are on the hook for the whole lot - which unfortunately makes you a good target for the creditors because you have assets. This is why I believe an IVA might be your best solution.

I hope this helps you understand your situation, even if it isn't what you really wanted to hear.

 

[susan1234]

Hi
Is it a ltd co

Hi
Is not a ltd, company but a partnership

 

[arcon5]

I hate to tell you this, but just because you have paid 50% off certain debts doesn't necessarily mean they have to chase the partner for the other half.
Partnership agreements are often equally an severally.

Edit: sorry just realised Alan has said that.

 

[susan1234]

I hate to tell you this, but just because you have paid 50% off certain debts doesn't necessarily mean they have to chase the partner for the other half.
Partnership agreements are often equally an severally.

Edit: sorry just realised Alan has said that.

Thanks arcon5

I fully understand the implication of a partnership and that its a joint and several liability.That is why I am so stressed up about it when she walked out. When I set out to negotiate the settlement of the partnership debts, I was only hoping to offer a reduced full and final settlement of the debts and then maybe pursue my ex later for her share of the debts paid. I was convinced I as a partner is fully liable which in actual fact I am. Its only when one of the suppliers/creditor suggested and agreed to me settling 50% and they will retain the right to continue to pursue my ex for the remaining. I have it all in writing that I am discharged from liability on the debt. I have consulted a solicitor on this and he has confirmed that arrangement like this is possible and legally binding.Other creditor then seem to follow suit and agreed to this settlement. Whether they will pursue my ex is up to them

Regards and thanks for writing in

 

[susan1234]

Received a letter this morning from their solicitor ,Eversheds , informing me that Barclays will be seeking to recover the debt through County Court if I do not come up with a reasonable proposal for the repayment of the deb within 14 days. I want to settle the debt but only able to raised limited amount. What would it be a reasonable amount to them ? Please advice......I am in quite a state at the moment to know what to do

 

[Alan R Price]

Received a letter this morning from their solicitor ,Eversheds , informing me that Barclays will be seeking to recover the debt through County Court if I do not come up with a reasonable proposal for the repayment of the deb within 14 days. I want to settle the debt but only able to raised limited amount. What would it be a reasonable amount to them ? Please advice......I am in quite a state at the moment to know what to do

It seems Barclays have identified the fact that you have equity and are proceeding accordingly. I recommend you urgently go and see an insolvency practitioner about doing an IVA. Advise Eversheds you are doing this and they will probably hold off for a few weeks. Your accountant can probably recommend an IP or alternatively, give me a call. A good IP will give you an hour or more of free advice to help you understand your options.

 

[susan1234]

Thanks Alan

I am at the moment on such a low income employment that I am just about managing to survive. Is IVA suitable to my circumstances ?


Warm regards

 

[arcon5]

Phone the StepChange debt advice charity for free impartial help.

Tell the collection agency you are deep in debt and taking advice from a debt charity, most will give you a 30 day grace period.

 

[susan1234]

Phoned and spoke to Stepchange today. As usual they were very helpful. But was a bit surprised by their requirements in F&F settlements procedures. I have to remit to them first the full amount of the fund I am able to raised. They will only then put the offer to each creditors with no negotiation. Is that how they worked ? Just that I have now the difficult task to explain and convince my family and friends to hand all this money to Stepchange and I think its not going to be easy.

Alternatively, I am thinking of proceeding with the DMP with Stepchange but tried to negotiate individually with the creditors myself. Is that a better idea and is it possible?

 

[arcon5]

You have to weigh up the pros and cons of F&F settlement if it means borrowing from loads of family and friends. Even if a charge is placed on your house doesn't mean it will necessarily be repossessed, if you defend it in court. Some lenders like the charge simply for peace of mind.

Nothing wrong with you negotiate a debt management plan with creditors yourself, although they don't offer the protection an IVA does.

It's HMRC you don't want to underestimate. They actively make people bankrupt.

Why not contact creditors directly and explain the situation (don't tell them you own your house) and ask for token payments for 6 months. Say you're trying to find work. In my experience lenders (even collection agencies) can be reasonable if you work with them (although there are some exceptions)

 

[arcon5]

Received a letter this morning from their solicitor ,Eversheds , informing me that Barclays will be seeking to recover the debt through County Court if I do not come up with a reasonable proposal for the repayment of the deb within 14 days. I want to settle the debt but only able to raised limited amount. What would it be a reasonable amount to them ? Please advice......I am in quite a state at the moment to know what to do

This doesn't necessarily mean they know about the property or they want a lump sum. Phone and make them a repayment plan offer - start low, very low and see where they go with it.


Did step change say anything about an IVA?

 

[susan1234]

This doesn't necessarily mean they know about the property or they want a lump sum. Phone and make them a repayment plan offer - start low, very low and see where they go with it.


Did step change say anything about an IVA?

Hi arcon5

I am in the mid of writing to them again explaining clearly everything my situation and asking them to reconsider my offer again as the the funds was raised initially to settle the business debts. Alternatively , I could instruct Stepchange to made them a repayment offer based on the income I have left each month which probably amount to a tenner. I am on such a low income employment, I earn enough to about cover the bills and expenses.

Unfortunately, the equity on my property is more than the total debts.Think I will not be eligible for an IVA should my personal wealth by way of personal savings, property or other assets be worth more than your debts.My mortgage on the property is with Barclays. Think they may already have knowledge of my property.

Should I ask them what a reasonable settlement proposal they are seeking? I know naturally they would be looking to seek the max. Should I up my offer a bit more?

Thanks arcon5.......really grateful for your feedbacks

 

[arcon5]

If they also provide your mortgage then unfortunately there's no incentive at all so settle for a lower figure. Make them an offer by all means otherwise focus on a repayment plan. Ask them to freeze interest and charges also, many lenders would agree to this.
If making them a payment plan option then include a copy of your income and expenditure by default. I found in the past when making such offers they'd send out these forms first so you could skip this step.

Make sure you budget for living costs reasonably, many list this as far lower than practical.

Btw sometimes it can be easier to discuss with them over the phone, this way you can propose different numbers and see how they react. You may be able to determine if they are going to play hard ball or actually willing to negotiate. Start low as usual.

 

[Alan R Price]

Thanks Alan

I am at the moment on such a low income employment that I am just about managing to survive. Is IVA suitable to my circumstances ?


Warm regards

It could well be, but you need to take specialist advice. Not all IVAs are structured around payments from income. There are equity release schemes, although these tend to be very costly, or it may be necessary for you to sell your home to release the equity, but you would probably be left with rather more if you did an IVA than if you went bankrupt. You will only be in a position to make an informed decision once you have been properly advised.

 

[susan1234]

If they also provide your mortgage then unfortunately there's no incentive at all so settle for a lower figure. Make them an offer by all means otherwise focus on a repayment plan. Ask them to freeze interest and charges also, many lenders would agree to this.
If making them a payment plan option then include a copy of your income and expenditure by default. I found in the past when making such offers they'd send out these forms first so you could skip this step.

Make sure you budget for living costs reasonably, many list this as far lower than practical.

Btw sometimes it can be easier to discuss with them over the phone, this way you can propose different numbers and see how they react. You may be able to determine if they are going to play hard ball or actually willing to negotiate. Start low as usual.

Thanks acorn5,

I will try to write to them first. At the moment, I am getting into such a state that I am worried I might get too anxious and said the wrong things if I was to speak to them over the phone.

I will try to ask them to reconsider my proposal again or the alternative is a DMP. Can't believe my life is descending to such a state when all my life I have worked hard and led a careful living......... Is it alright to ask you of your opinion on the letter when I have completed it tonight ? Just made me feel better with a second opinion.

Thanks once again for your much needed support.

 

[susan1234]

It could well be, but you need to take specialist advice. Not all IVAs are structured around payments from income. There are equity release schemes, although these tend to be very costly, or it may be necessary for you to sell your home to release the equity, but you would probably be left with rather more if you did an IVA than if you went bankrupt. You will only be in a position to make an informed decision once you have been properly advised.

Hi Alan

I did see an IP after the business closed down. Again, because of the equity in my property there were not much option for me except the possibility of selling my home. Because its our family home, it is not something I would want to do. Its the focus in my life and my children, otherwise I will have no purpose left. Anyway, guess emotional reasons count for nothing in monetary terms but at least if gives me a very good reason to keep trying. Also, its to show to my ex partner I am not defeated by her actions.

Thanks Alan for your support and invaluable advices.........I am really grateful

 

[Alan R Price]

Susan

I admire your determination! My concern is that you should be realistic in terms of what can be achieved. If you do have to sell the house, it will not be the end of the World - many people have been through bankruptcy or IVA (or had to sell their house to avoid one or other of these) with their personal lives and sanity intact - in fact sometimes it is the catalyst for their lives to return to normal (ask Spongebob, who posts on this forum!). Having a business go bust does not make you inadequate or a bad mother and while moving house can be a sizeable challenge, it might be the opportunity you need for a fresh start. I'm not saying it is the only option but it is worth keeping an open mind: the greatest danger is in aspiring to the impossible or improbable, thereby prolonging the agony and exacerbating the outcome.

 

[susan1234]

Susan

I admire your determination! My concern is that you should be realistic in terms of what can be achieved. If you do have to sell the house, it will not be the end of the World - many people have been through bankruptcy or IVA (or had to sell their house to avoid one or other of these) with their personal lives and sanity intact - in fact sometimes it is the catalyst for their lives to return to normal (ask Spongebob, who posts on this forum!). Having a business go bust does not make you inadequate or a bad mother and while moving house can be a sizeable challenge, it might be the opportunity you need for a fresh start. I'm not saying it is the only option but it is worth keeping an open mind: the greatest danger is in aspiring to the impossible or improbable, thereby prolonging the agony and exacerbating the outcome.

Thank you Alan. You not only give sound sensible advice but you sound like a real gentleman ........your advice is well heeded. What you said has crossed my troubled mind numerous times. I have been weighting up the pros (more the pros) and cons of the possibility of losing my house since all this started. It sucks and it hurts ....especially when the other week my eldest boy offered to sell his ps3 to help out. I need to try. Phoned Barclays this afternoon but person in charge was out. Awaiting to hear back from them today.Will let you know if they are going to rip me apart.

Thanks Alan. Everyone on this site who wrote in have been of great support

 

[arcon5]

By the way if they accept a payment plan and you later default then expect them to get heavy handed by at least going to court just to place a charge on your house.
HMRC can be more ruthless and make people BR regularly.

So if agreeing payment plans then I must emphasise what Alan has already said - be realistic. The PP will be long term remember so don't see yourself living on the breadline every month going forward. Things like household appliances will go kaput, your car will suffer wear and tear, your kids will want Christmas presents, your wife may even want a meal and some flowers on your anniversary. So sit down and work out reasonable living expenses then apportion the rest to your debts. Even in BR and IVAs etc they will allow a reasonable figure for everything from rent to housekeeping to other expenses.

By the way, I wonder if Barclays would agree to add this debt to your mortgage? Well worth asking them!!
Or perhaps let you remortgage to allow you to at least pay down some debts leaving you with other low risk ones to pay over time.