# Personal Bank Loans - Out of Business Sole Trader



## irlscoob (29 Aug 2011)

Hi,

Just looking for a little advice. I'm sure everyone know someone or has someone close in trouble with debts but here's my tale.

I have a family member who ran a small business as a sole trader (this form was insisted upon by the "employer/supplier"). She was then placed in the middle of a business model where the supplier had to be paid on time and also all taxes paid on time. When this whole venture started I pointed out the obvious flaw that the person who's not guaranteed to be paid was herself.

Needless to say the business spiralled out of control when the customers stopped paying and she took out various loans to pay the supplier and her tax, mainly VAT while waiting on her customers to pay up. The business ceased and the debts oustanding, personal due to the sole trader nature of the operation (I assume?) total about 30k. She is now not working, recovering from a couple of serious near death health scares and completely at her wits end as to how to handle it.

Her husband is working but on low wages, enough for them to pay the mortgage and survive. He knows nothing about the loans she took out.

The question is what options are open to her? I asked her to engage with the banks, who were at best mildly helpful and at worst threatening. In the case of the threatening one I told her to offer them 50% of the debt outstanding (which I would pay) and they said no chance. The reality is soon she won't be able to pay at all as the husband is retiring.

Given her situation can she do anything or does this just meander on until the bank take her to court (which will get no one anywhere as there is no money, there's only their house - I'm not sure how safe that is in that scenario though?) or is there a way to get them to seriously see this situation is a very bad one and adding more interest won't help it.

Thanks in advance.


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## hastalavista (29 Aug 2011)

how many lenders are there and what term/rates apply?

what ages are they?

As an aside, will the mortgage be paid off when the hubby retires.

I am assuming that the loans are personal to her and are not at all secured on the house, they are in effect personal unsecured loans.

Is the house jointly owned and the family home?

Once you clarify the above I think you will get better advice here


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## irlscoob (29 Aug 2011)

There's a couple of lenders but to all intents and purposes one given the relative size of the loans there.

Husband is two years from retirement and mortgage will be paid up before then. Wife is 53 but as I said probably going to be unable to work for sometime due to a stroke.

The loans were personal to her (and the now defunct business). House is jointly owned and the family home. 

I think you've hit on an important question. Given she now has no personal income how heavy handed can the bank be. They effectively loaned the money against a business that doesn't exist anymore.

Thanks again for taking the time to read and reply.


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## mf1 (30 Aug 2011)

"They effectively loaned the money against a business that doesn't exist anymore."

No. They did not. Your friend borrowed the money. 

It would be far better if both you and she would re-adjust your mindset so that, instead of seeing her as a victim of other people's actions, e.g "She was then placed in the middle of a business model", she would take responsibility for her own actions. She set up in business and it failed. She's not the first, won't be the last. 

Her creditors will get a judgment against her for the money that she owes and it will then be a matter of how they enforce that order. It may mean placing a judgment mortgage on her jointly owned asset - the house she lives in. I dislike the use of the term "family home" as it conveys the impression of an almost intangible, protected, untouchable asset - it very much is not. It is bricks and mortar. 

Her current, personal circumstances are awful by the sound of it.  It may well be that, when push comes to shove, the bank won't enforce the judgment. 

mf


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## irlscoob (30 Aug 2011)

I understand the capitalist realities of what's happened and how she made incredibly bad decisions, I'm just trying to figure out how to help. I really don't see her as a victim of anyone's action but her own.

Ocourse I take the obvious point taken she signed up for the business model despite my cautions and wasn't forced into it that's not really what I was asking for help with. I also used "family home" as the previous poster had used that term.

I'm not sure the question of whether the house, as a jointly owned asset, could be placed in a forced sale.


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## user name (30 Aug 2011)

Will husband be getting a pension when he retires.


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## hastalavista (30 Aug 2011)

mf1 said:


> Her creditors will get a judgment against her for the money that she owes and it will then be a matter of how they enforce that order. It may mean placing a judgment mortgage on her jointly owned asset - the house she lives in. I dislike the use of the term "family home" as it conveys the impression of an almost intangible, protected, untouchable asset - it very much is not. It is bricks and mortar.
> mf



I want to tease this one out a bit.

Does the the family home protection legislation not help here?
http://www.citizensinformation.ie/en/birth_family_relationships/separation_and_divorce/family_home.html


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## mf1 (30 Aug 2011)

"Under the family home protection legislation, in a debt secured on the house, both parties need to sign to enable a judgement mortgage to stick to the family home.

http://www.citizensinformation.ie/en...mily_home.html"

No, you've made a very common error. 

The whole point of the Family Home Protection Act was that an owning spouse could not voluntarily create a charge on or sell the property within which a married couple ordinarily resided without the consent of the other non-owning spouse. Think of it in terms of what was once the more usual property owning situation in a married couple sitution - husband owned everything in his sole name. Wife owned nothing and husband could sell without any input from the  wife. 

This does not apply when you have spouses who are joint owners and one runs up debts. The house is an asset and it is the share of the debtor in that asset that can be attached. The other owner does not assume responsibility for the debt but, given that the only way to enforce the debt  may well be that the creditor seeks the sale of the family home, the reality will be that their circumstances alter fundamentally. The joint owner who has no debt will keep the proceeds of half of the house – the debt will be taken from the debtor’s share. 

If it was the case that the family home was inviolate you can picture the scene – it would be immune from debt. 

I trust that clarifies the situation? It is a very common misconception. 

mf


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## irlscoob (30 Aug 2011)

Thanks for all the replies.

It sounds like pleading with the lenders is all that's left really.


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## Panacea (3 Sep 2011)

"Needless to say the business spiralled out of control when the customers stopped paying and she took out various loans to pay the supplier and her tax, mainly VAT while waiting on her customers to pay up."

If there were bad debts from customers not paying has she reclaimed the vat element on these amounts? (assuming she has paid the vat on the basis of credit sales and the amounts are subsequently written off as irrecoverable).

If there is vat recoverable and access to financial help from the op then the bank may be more open to finding a workable solution.


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