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marcusjames
Starting Member
25 Posts |
 Posted - 25 September 2008 : 23:53:52
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A friend of mine was in trouble paying his mortgage a few years back so I lent him £4k to see him through. A year later he sold his house, realised £30k of equity and repaid me.
Ten months later other trade debts got on top of him and, without my knowledge, he filed for bankruptcy. I spoke with him today and the insolvency office are asking for the £4k back so they can pay trade creditors. They are saying that he is not able to choose whom he repays. They have claimed they will contact me and demand it back.
Does this sound right ? If I lend money "against" the house and he in turn sold it, am I really a prefered creditor over and above his business trade creditors.
After going through the numbers with him I was shocked to see he owes "only" £20k. I appreciate that this is a lot of money but relatively small when considering the severity of bankruptcy. Now the creditors have been contacted to say that he has filed, do you think they may accept a part-payment settlement over a number of years. Not sure if this is 1, allowed and 2, something they would consider. Perhaps an IVA would make more sense.
Any help would be gratefully received.
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John
New Member
United Kingdom
73 Posts |
Posted - 26 September 2008 : 03:43:02
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Hi
if your friend was a sole trader, and his business was therefore not a limited company, then his personal and trade debts are treated as one and the same. Having realised £30K from the sale of the property he should and could have paid all debts. By paying you only this is called preferential treatment. In these cases the trustee is perfectly entitled to reclaim the £4K and distribute it pro rata amongst all of the creditors.
However, if you no longer have the funds and you are unable to repay this sum the fault does not actually lie with you. Your friend will almost certainly then be given a BRU or BRO. This means he will remain under the restrictions of bankruptcy for an extended period, up to 15 years in some cases but if your repayment is the only problem it would more likely be 2 to 5 years.
Your friend can indeed apply for an IVA even whilst still in bankruptcy. This does not mean that you will not be asked for the £4K, but if don't have it then you cannot return it. You had no idea that he was paying you and only you, you lent the money and received repayment in good faith.
An IVA for the sum of £20K plus approx £6K in IP fees would normally cost a minimum of £233 per month for 5 years.
As a matter of interest do you know which month & year your friend was declared bankrupt?
www.Bankruptcyhelp.org.uk
0800 078 9367 |
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marcusjames
Starting Member
25 Posts |
Posted - 26 September 2008 : 08:46:38
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Thanks for the quick response.
He was declared bankrupt in July 08. However, I'm not sure if he filed then or has actually been declared. He appears to still be having regular meetings to discuss creditors and monthly expenditure so I assume it's not too late. He apparently rushed it through the week before he got married so to protect his wife's personal assets. Not sure if this is mis-guided.
When he sold the house, creditors totalled £50k so he could not have cleared everyone unfortunately.
Is there a timescale when I can prove that my initial loan to him is completely unconnected to his recent financial difficulties ? |
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John
New Member
United Kingdom
73 Posts |
Posted - 26 September 2008 : 11:35:31
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Hi
yes there is.
If the payment of the £4K was more than 2years prior to the date he was declared bankrupt then preferential treatment rules do not apply.
www.Bankruptcyhelp.org.uk
0800 078 9367 |
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Any help would be gratefully received
