What to do when it all goes pear shaped...?

[DMTW]

Hi, first post here and its a rotten one.

My partner lost his business just over a year ago in its second year of operation. He went under with quite a bit of debt, ca. €90 grand all in his own name. He has visited the Money Advice Bureau, but they havent been terribly helpful. He really finds it difficult to face up to the whole thing, it was a very tough time for him, but in the last few weeks, he has decided to attack it before 'it' attacks him. He contacted FLAC, but they wont be of any use to him.
I suspect what he really needs is to find a good solicitor who specializes in these matters and perhaps look into declaring bankruptcy. He has no large assets such as a house. Basically neither of us really know what to do now. Any advice or useful contact details would be appreciated.

 

[MOB]

There is very little help out there for somebody in your partner's position. There may well be firms which specialise in bankruptcy on the debtor side, but I don't know them.

It may well be the case that he needs to declare bankruptcy. Another, usually more attractive, option is to work out a scheme with his creditors. In doing this, he might draw up a statement of affairs, let everybody see what he has and what he can earn, and perhaps agree that over a period of 3-5 years they will all be paid 50c in the Euro (or whatever). In drawing up such a scheme, it is vital to avoid unrealistic optimism - the agreed payments must be at a level that he is sure he can meet them. If creditors see the facts (and believe them) they will be quick enough to accept a settlement like this.

The big problem most debtors have is that they ignore the problem, which never helps.

 

[DMTW]

There is very little help out there for somebody in your partner's position. There may well be firms which specialise in bankruptcy on the debtor side, but I don't know them.

It may well be the case that he needs to declare bankruptcy. Another, usually more attractive, option is to work out a scheme with his creditors. In doing this, he might draw up a statement of affairs, let everybody see what he has and what he can earn, and perhaps agree that over a period of 3-5 years they will all be paid 50c in the Euro (or whatever). In drawing up such a scheme, it is vital to avoid unrealistic optimism - the agreed payments must be at a level that he is sure he can meet them. If creditors see the facts (and believe them) they will be quick enough to accept a settlement like this.

The big problem most debtors have is that they ignore the problem, which never helps.

I really dont think he is going to be able to handle that on his own. It was so stressful at the time that he neared a nervous breakdown. Is there noone at all that can mediate between creditor and debtor in this situation? What are the cons of declaring bankruptcy?, we've both accepted that his credit rating is out the window anyway... He is also supporting me at the moment, (only for a few more months) and so has little money with which to pay any debts.

 

[balboa]

I hear you its, a terrible time, but not the end of the world although it feels like it. he is not the first and not the last.

My friends used a combination of MABS and liquidations.ie due to having both personal and business debts.

They had to borrow money from family to pay the fees to liquidations.ie , but it all went away which is what you want. HOWEVER they were dealing with a limited company.

On to MABS, once the business was disposed of, MABS were very open to helping with the personal debt side of things which had stupidly been run up in his own name. I think maybe they can't help much until the business is dealt with.

 

[pat127]

Another organisation which can help is FISC (Financial Information Services Centres). MABS may involve them anyway otherwise contact them through your local CIC.

[broken link removed]

 

[dstanley]

can he go into liquidation as opposed to bankrupsy? its not as bad

 

[Brendan Burgess]

No liquidation only applies to companies, not to individuals.

MOB - can an individual opt for bankruptcy in Ireland? I thought that a creditor had to apply to have someone declared bankrupt?

Brendan

 

[MOB]

Brendan; Loose words on my part: it is technically possible for a debtor to make an application to have himself declared bankrupt. However it is virtually unheard of. The bankruptcy act 1988 is surprisingly readable, if you want to take a look.

The more likely scenario is that you would lay your cards on the table with the biggest judgment creditor, and they would take the decision to move the bankruptcy application.

 

[jeepers5]

Hi there, have you not got an accountant that would deal with all of this for you?,

IMHO, the first thing you should do is get a list of your creditiors, and the balances, start with the most urgent (i.e the ones that are facing court shortly etc), and send off corrospondance to them from your accountant.

In realiaty, yes E90,000 is a lot of money, but it would still be managable.

The questions you need to ask is what is the maximum monthly amount that he could afford to pay, and set up a standing order for the amount.
Once these companiess see that he is making some sort of re-payment , then most of them will start to relax, also, if it does go to court, the judge will look more favourly on a guy thats been making some effort than none at all.

 

[DMTW]

I just thought I'd update this. I gave him an ultimatum to go to a solicitor and get this sorted, and he did...
I'm not sure exactly what is happening at the moment, the solicitor is working with his old accountant and the debt has been transferred to a subsequent limited company which has since been dissolved... so the sole trader company is clear. He is still liable for the debts.
He has just started in full employment again (rather than contract work), and will be in a position to make offers to the creditors in the next month or so.. and he is in a good position to bargain now. No judgements have been made against him yet, so hopefully he has dealt with all of this before it got out of control.
If anyone else is in this situation, seek help... It will be so hard and stressful, but so much better in the long run. I was afraid of the gardai calling to our front door, and taking him in, but I'm not afraid of that anymore.

 

[Brendan Burgess]

HI DMTW

Thanks for the update. Unfortunately, it's very confusing and I would worry that readers in a similar position might feel that they can just transfer personal debts to a limited company and liquidate it to avoid paying them.

Brendan

 

[DMTW]

No its not like that at all. He is still liable for the debts... presumably because he was a sole trader when they were incurred.
I am as confused as anyone.
Basically he was in the process of changing to a limited company before it went bust... I'm not sure how much had already been changed over, communication ceased with the accountant for a few months, so we didnt know how much of the process had been completed.
He's meeting with the creditors in the next few weeks with a statement of means etc... and will make an offer.

 

[jhegarty]

HI DMTW

Thanks for the update. Unfortunately, it's very confusing and I would worry that readers in a similar position might feel that they can just transfer personal debts to a limited company and liquidate it to avoid paying them.

Brendan

Sounds to me like its possibly some type of tax write off , as apposed to clearing the debts ?


DMTW: Well done on making him face up to it. Its really not that much money, I am sure more posters here own multiples of that on their mortgage. Good luck with it , but looks like you are on the right track.

 

[DMTW]

I'd like to clarify, that the limited company was in full operation for two years... but loose ends from the ST company hadnt been tied up.... Now the ST company is returned to 'normal' status with no debts or tax liabilities (it never owed any money to revenue anyway...) and the limited company is being dissolved with just those old debts to contend with. All tax bills have been settled. Unfortunately the ltd company cant be liquidated as there are no assets to speak of, so offers will be made to the creditors.

Gosh you really do need knowledge to deal with all this stuff... its all double dutch to me. A hard lesson learned.

And yes 90,000 may not seem like a lot to someone with a huge mortgage, but at least the mortgage is legit and acceptable. OH has no prospect of a decent credit rating for many years, so there'll be no big mortgages for us....for quite a while...