Unable to repay overdrawn directors loan account after voluntary liquidation

[peter harris]

I put my company into voluntary liguidation last year.

The liquidators have noted that there was an overdrawn directors loan account of around £22k which I am unable to repay as I am still out of work.

They are now threatening to proceed with bankruptcy proceedings.

Can anyone comment please this is a very stressful time?

My main concern is that obviously I dont want to loose my house over this.

Do the liquidators have the power to right off the directors loan if they wish or must they retrieve the full amount by law?

Any advice would be gratefully received. Thank you.

[Fat Dave]

I'm not an expert, but hopefully one will be along soon. I assume the liquidators want you to repay the loan because you have other creditor(s) who want paying. If this is the case, will your creditors accept nominal interim payments until you get back on your feet? You really need to avoid the bankruptcy route (sorry for stating the bleedin' obvious), and if you can show you are making some attempt at repayment, that must be a point in your favour.

You could offer your creditors a charge over your property, which only guarantees they will get paid when you sell it, but they may accept it.

Do you have enough equity in your property to be able to sell it, clear your debt, and downsize to something smaller/cheaper? Probably not an attractive option, but better than losing your house for the wrong reasons.

If there's not enough equity in your house to cover the debt, then what would they gain by making you bankrupt anyway?

You could put your house on the market, offer the liquidators a Solicitor's Undertaking, which guarantees they will be paid from the proceeds. Then, if you get lucky and get another job before a sale goes through, you can take the house off the market and start paying off the debt.

Please don't make any decisions based on free advice off the internet, particularly mine. See a solicitor.

Good luck!

[krytonsheep]

I'd seek a professionals advice.

There is some info on the HMRC site which includes..

If any part of a loan from the company to the director is not repaid by the director, it can be assessed on the director personally under Section 421 ICTA 1988 (as if the amount were a net dividend), so long as the liquidator formally writes off that unpaid balance.

In order to tax the unpaid element in this way, the liquidator must make an active decision to either write off the debt, or not to pursue it. It is not sufficient that the liquidator merely takes no further action and the liquidation is closed.

[TheFaQQer]

It's a loan - I would expect that they can call it in at whatever time they want to.

If there is any debt owing from the company to HMRC and you were negligent, then I would expect them to come after you personally for the money as well.

Sounds like IVA / bankruptcy is the only way out if you haven't got the means to repay the loan.