Small Company and Personal Bankruptcy

[infernal]

Hi all.

My husband and I run a small company with only us as employees. We found out last week
we are no longer needed and are out of work.
The prospects for work is slim and what work my husband can get is a major pay cut for us. To the point no debt would be able to be paid and we would be living very tightly for the foreseeable future.
The company owes a bank loan around $86K. And personally we owe around $68k in personal loans and credit cards.
As it stands, we cant pay any debt bills. Our accountant said to not even try to pay any as bankruptcy seems our only way out.
We are just not sure how it all works. We cant afford to liquidate the company, so we were told to let the creditor to send us bankrupt.
How does this work?
How long until this would happen?
My husband is personally liable for the company debt, so obviously they would come after him?
Wouldn't that mean it would be wise for us to not go personally bankrupt until the company went under, because we would need to include the company loan in the bankruptcy aswell?

If we dont pay our debt, how long till people start hounding us for the money?
Should we talk to them and hold them off, knowing full well we wont be able to pay them?

Also im concerned about how the assets work in Bankruptcy, I cant get any definite answers on the net or financial hotlines.
We are not rich people and just have the standard household items. Couple of collectible statues, but nothing of real value. However, my husband is an old car hoarder, nothing of value as most dont go and rusty. Is this something they can take anyway. My husband loves these, me not so much, but they are for the most part worthless, not registered and havent been for decades. Also he has accumulated money tools and machinery and old car parts over the years. Worthless to other people, but valuable to my husband. Can they be taken?

This has been really stressful and absolutely soul destroying. And would greatly appreciate any help given.

Regards

Leanne

 

[Rob Legat - SBPL]

The company and your personal situations need to be considered separately. They are linked, but the processes and the responsibilities are different.

The company
- Companies don’t go ‘bankrupt’. They become insolvent and, usually, get liquidated and wound up.

- It is imperative that once you form the suspicion your company is insolvent that you do not continue trading. If you allow the company to incur further debt without a reasonable belief that it will be able to pay that debt, you’re breaking the law. As well as becoming potentially personally liable for the debt, you can also be subject to civil and criminal penalties. In short – don’t run the risk.

- If you can’t pay all creditors, don’t pay any. Doing so could lead to what’s called a ‘preference payment’ and the ultimate liquidator may claw that back.

- Putting the company into voluntary liquidation is going to cost money – a bare minimum of at least $5,000, and that will be for the most basic appointment. Unless you’re willing to put up the money personally, odds are that you’re not going to be able to afford that.

- You’ll likely have to wait until someone applies for a winding up order against company. The court will appoint a liquidator who gets paid out of the assets of the company only.

- Communicate with your creditors what is going on immediately but don’t make any payments. Be prepared for a degree of demands and threats from smaller creditors who don’t understand insolvency. The bigger ones will either wait, or take action if they think it’s worth liquidating.

- Secured creditors can seize their security/make demand under any guarantees.

- How long this process takes is up to the creditors really. It could be a while unless someone takes charge.

Personally
- If you become bankrupt, you cannot be the director of a company. Bear that in mind.

- Any guarantees given for the company will likely be shifted to you personally.

- While a creditor can sue you and seek a sequestration order to have you declared bankrupt, you can also make what’s called a debtors petition to declare yourself bankrupt. This is relatively simple and cheap to do.

- I’d suggest doing some reading on the Australian Financial Security Authority website (www.afsa.gov.au). The information they have there is generally good.

- Once bankrupted you can generally keep ‘household items’, including a car up to a certain value and some tools of trade.

- Items of value like antiques and collectibles may be taken by the bankruptcy trustee to sell for creditors. What the trustee will do with the cars, for example, is unknown. If it’s too hard, they might just leave them alone.

- You’ll need to provide a full reckoning of your assets and liabilities.


The big thing is – don’t lie to your creditors. Be up front about what has happened. If you lie or put them off, they’ll just keep coming and your stress levels will go up. Tell them plainly. You might find you actually get some sympathy out of them for being honest (not a lot though – they’re still not going to get paid at all or anytime soon, but they should appreciate you didn’t string them along).

 

[infernal]

Thanks for your information.

After the end of next week, we wont have anymore work, and I believe my accountant said she would De-register the company. So we wont be trading anymore.
Our last pay will be more than we usually take as a wage, but seeing as we have no employment options atm, we are going to withdraw the money and pay a good chunk into our rent. Will this be ok to be done? We dont know when we will get paid next and we need somewhere to live.

Seeing as my husband is liable for the Company loan, we need to add this with his personal bankruptcy correct?, do we have to wait till someone orders a winding up order for the company before proceeding with personal bankruptcy?

Also, with my husbands rusty car and car part collection, they have no value, a few hundred at most. None are registered and for th emost part not working. By the time they organized to pick them up and then sold to a wrecker, the cars would owe them money. So would they even bother in taking them? How do they even value them?

When the debts stop being paid and people ring demanding money, I should be truthful and say we cant pay and bankruptcy is something we are looking at doing? Or just say we cant pay and we are trying to rectify the situation?

And I know this seems like a stupid thing to be worrying about, but my parents have paid for a 11 day family cruise later on in the year, its all paid for. Is it possible they can stop me from going?

Thanks

 

[Rob Legat - SBPL]

- You can't de-register a company which has outstanding debts.
- If you take substantially more out of the company than you usual drawings, be prepared to face questioning from a liquidator. If they form the opinion you've done so to defeat your creditors, especially if you're planning to go bankrupt (so the trustee can't claim it back from you), be prepared for further questioning and the possibility of prosecution.
- His guarantee is a liability and should be disclosed in bankruptcy.
- You don't need to wait on the company. But once you're bankrupt, you cannot be directors of the company. Your bankruptcy trustee may need to take control.
- As for the cars: up to the liquidator, on both counts.
- I'd go for the full truth. If you're serious about bankruptcy, don't sit on it.
- If you're bankrupt, you need permission from your bankruptcy trustee to go outside Australian territory or territorial waters. You'll likely be able to retain the gift otherwise, but I suggest declaring it to the trustee - you'd need to in order to get the necessary permission anyway.