# Any self employed Bankruptcies



## Gyroscope (16 Jan 2017)

I'm trying to find a self employed person who has been through the bankruptcy process who would be willing to answer a few questions.

What kind of accounts does the OA use or is it a tax return to assess income etc

How was the OA's interaction re running the business on an on going basis?

I've a small business - how much detail does he need re asset value?

Any information would be great.

Thanks 

Gyro


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## Jim Stafford (17 Jan 2017)

It depends on the business.  For example, we had one  client, a taxi driver, who "managed" his own income and kept his income beneath the Reasonable Living Expenses and was discharged 12 months later from bankruptcy without an Income Payments Order being made. He had little contact with the OA as it quickly became obvious that he was not going to exceed his RLEs.

Fir other more complex cases we arranged for the bankrupt to incorporate his business and become an employee.  In these cases, as the bankrupt cannot be  a director, he needs to find someone to act as a director, who is usually a spouse or family member. Such a structure is ideal for seasonal type businesses, as the income can be spread over a year.

Jim Stafford


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## Gyroscope (17 Jan 2017)

Thanks for your reply Jim,

I would be a very small business very similar to your taxi driver in structure and turn over. In that case or a similar case does the OA look for on going management accounts or does he rely on previous tax returns? As one month I could be up and another down but over the year my income would be below the RLE.

Thanks Gyro


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## Jim Stafford (18 Jan 2017)

The OA has to assess you on your "current income".  He employs trained accountants who will review your bank statements, sales invoices etc and then decide if they need to become more forensic in calculating an Income Payments Order. 

If your business is only making modest profits, the easiest thing to do (for both you and the OA!) is to transfer the business to a limited company owned and controlled by your spouse or a family member and draw a fixed salary each month.  You should view the costs of setting up a limited company as one of the costs of going into bankruptcy.

Jim Stafford


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## Gyroscope (18 Jan 2017)

Thanks Jim,  Would that incorporation be done with the OA permission or pre bankruptcy.

I'm trying to get my head around this before I start the process.

Thanks 
Gyro


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## Bronte (18 Jan 2017)

Honestly Gyroscope I don't understand why you don't hire Jim S. to do the job for you.  Isn't it time you begin the ending of this torture?  You agree a price, if that's what you're afraid of and away you go.  You'll have it fully explained to you, by someone competent, who knows what he's talking about, whose done it before.  Like it's a no brainer to me.

And I'd bet his price is based on ability to pay, or he'll turn you down if you can't afford him.  But without asking you can't find that out.


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## Gyroscope (18 Jan 2017)

Bronte said:


> Honestly Gyroscope I don't understand why you don't hire Jim S. to do the job for you.  Isn't it time you begin the ending of this torture?  You agree a price, if that's what you're afraid of and away you go.  You'll have it fully explained to you, by someone competent, who knows what he's talking about, whose done it before.  Like it's a no brainer to me.
> 
> And I'd bet his price is based on ability to pay, or he'll turn you down if you can't afford him.  But without asking you can't find that out.



Bronte, I'm sorry if you find me asking a question or two frustrating on the 'askaboutmoney' website... like! It might be a 'no brainer' to you to go and hire someone like Jim (whom I'm sure is excellent at what he does) and stop the torture but I don't have three or four thousand euro - not even close to it. So I'm trying to gather as much information as I can so when I sit in front of the judge or the OA or who ever else, to explain myself, I don't look like the failure I feel inside.

So thank you for throwing in your condescending comment and adding to the This post will be deleted if not edited to remove bad language I feel about having to ask these questions - it's always nice to get such wonderfully enlightening commentary from smug people like yourself! If Jim doesn't want to answer the question I'm sure he's perfectly capable of ignoring it!


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## Bronte (18 Jan 2017)

Gyroscope I didn't mean in any way to imply that.  I was only suggesting it.

Can I suggest you put up all the questions you feel you need in one post.  And also if you can put up the financials.  Nobody know who you are so don't worry about that.  And I'm very sorry for your predicament.

I see another poster on here Padraic Kissane is online now as he's on a thread I was one.  He might be cheaper than Stafford.  (just an idea).


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## demoivre (18 Jan 2017)

IMHO don't charge fees for their bankruptcy service (other than court fees)


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## Bronte (18 Jan 2017)

demoivre said:


> IMHO don't charge fees for their bankruptcy service (other than court fees)



I hadn't realised they were offering that service.  How do they get paid then?

At least the court fees have come down a lot.


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## Adecco (16 Feb 2017)

Jim

May I ask one question re your suggestion above of appointing someone else as a director while the self-employed bankrupt draws a minimal salary putting them below the RLE. (This whole approach can apply to me also)

I'm an IT contractor - I have a limited company. I'm currently a director but can easily become an employee and take a minimal salary like you suggest.(while appointing a family member as a director)

For any surplus funds earned during the 12 month bankruptcy period above the minimal salary I would take, presumably these would be stored in the company account as cash reserves yes?

After my 12 month bankruptcy period, can I then simply reinstate my self as director and access these cash reserves (while paying the appropriate taxes) stored in the company during my 12 month bankruptcy? Is it that straightforward? Or is this approach blocked by the OA for some reason?


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## TLO (16 Feb 2017)

Be careful.  If the share(s) in the Ltd company are in your name then they will form part of your bankruptcy estate and the OA may express an interest in them.  Might be an idea to sell them to a relative before first, but you will still need to advise the OA that you did this, along with advising of any other asset disposals that you did prior to applying for bankruptcy.


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## Jim Stafford (16 Feb 2017)

Adecco, If you are earning large fees as an IT contractor than you need expert advice as to whether the company should pay for the "goodwill" that you are transferring to the company.  You would also need expert advice as to the appropriate  level of your salary from the company.

If you are insolvent, everything that you do must be transparent and legitimate etc, as everything will be closely examined by the Official Assignee.




Gyroscope said:


> Thanks Jim,  Would that incorporation be done with the OA permission or pre bankruptcy.
> 
> I'm trying to get my head around this before I start the process.
> 
> ...



Believe me, you would want to do the incorporation before self adjudication. As I have indicated above, you would need to take expert advice from an accountant on valuations/share structure /tax etc

Jim Stafford


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## Adecco (16 Feb 2017)

Thanks Jim

Although I'm not sure what professional I should seek out to get these questions answered? An accountant?
As an aside the company currently holds very little cash.

As for your 3 points:

- Changing from Director to employee would be legitimate as obviously legally I am blocked from being a director during bankruptcy. So I would be forced to in that regard.

- Not sure what you mean by the company paying for goodwill that I am transferring to company? I am a one man band contract - going to various companies for maybe a year at a time paid a daily rate.

- And your final point re appropriate level of salary. Who could answer that for me? You say an accountant yes? But presumably an accountant who knows all about insolvency? Are they a special breed of accountant again?


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## TLO (16 Feb 2017)

Adecco, Jim could easily be described as "an accountant who knows all about insolvency".  It might be worth visiting his website,  www.frielstafford.ie, and maybe booking an initial consultation.  Disclaimer:  TLO has no connection with Jim or his firm but wishes to point out that Jim is a frequent contributor to this forum, and his contributions are particularly relevant due to his practitioner experience.


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## TrueBlue (1 Mar 2017)

Jim Stafford said:


> ....we arranged for the bankrupt to incorporate his business and become an employee.  In these cases, as the bankrupt cannot be  a director, he needs to find someone to act as a director, who is usually a spouse or family member. ...
> 
> Jim Stafford



Jim,
I've followed your posts here for a long time and held you in the highest regard. However, you should reconsider advising your clients to set up this arrangement. The OA is wise to this and you may be setting up your clients for criminal prosecution (and possibly yourself).

http://www.odce.ie/Portals/0/Bankruptcy and Company Directors .pdf
“…if any person being an undischarged bankrupt acts as officer, auditor, liquidator or examiner of, or directly or indirectly takes part or is concerned in the promotion, formation or management of, any company except with the leave of the court, he shall be guilty of an offence.”

.i.e. bankrupt...acts...indirectly...(in the)...management of any company...he shall be guilty of an offence



Jim Stafford said:


> ......If you are insolvent, everything that you do must be transparent and legitimate etc, as everything will be closely examined by the Official Assignee.....Jim Stafford


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## Jim Stafford (1 Mar 2017)

TrueBlue

Thanks for your comment.

The operative phrase is to "_become an employee_".  We have had no clients notify us of any particular issue becoming employees with either the Official Assignee or, in the UK, with the Official Receiver.  (The UK has similar legislation, and we had at least 75 clients who went to the UK to go bankrupt.)

If it was raised as an issue then the person could apply to Court for "_leave_" to carry out the particular job.  Provided everything was done on an "arms length" basis and fully transparently, I could not see a reason for the Court to refuse such leave.

Some of the possible issues that you identified can be avoided if the "Newco" is incorporated before the debtor goes bankrupt, as the debtor could not then be accused of taking part in the the "promotion or formation" of the Newco whilst he is a bankrupt.

The reality is that many business people who go bankrupt are directors of vibrant trading companies when they became bankrupt.  Upon bankruptcy, they have to resign as directors, but they may stay on as an employee.

Jim Stafford


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## TrueBlue (1 Mar 2017)

Hi Jim,

I'll bow to your experience here. Points noted.


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