Help on Bankruptcy

[marcusjames]

Hopefully you guys can offer some advice.

A friend of mine was in trouble paying his mortgage a few years back so I lent him £4k to see him threw. 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, with my knowledge, he filed for bankruptcy. I spoke with him today and the insolvency office are asking for the £4k back so he 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 ?

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.

Any help would be gratefully received.

[deevlash]

but you cant give it back, you spent it all on cocaine and hookers didnt you?

[Brown and Boris]

I am no expert but I guess you can prove when you lent him the money ( ie it going from your account to his), and when it was repaid, ie before he filed for bankruptcy?

[marcusjames]

Apparently any "creditors" (even personal ones) repaid in the past 5 years are questioned and challenged as part of a preferential treatment before trade creditors.

[Broccers]

How did you give him the money ?

[marcusjames]

I gave him the money in cash and he repaid me via a bank transfer.

[Broccers]

Tell the people you lent it him previous to any of the trade debts :-)

[Zod]

it's nothing to do with preferring trade creditors (unless they are secured). It's just a voidable preference. You should have received a proportionate share out of his bankruptcy along with the other unsecured creditors after payments to secured creditors.

[andymc]

i think the preferential treatment goes back 4 years, ask on here:
http://www.bankruptcyhelp.org.uk/forum/default.asp

[Maxf]

So you can lend someone some cash, they pay you back. Then up to 4 years later they go bankrupt and you can be asked for it back - even if the bankruptcy issue happens after you lend/receive the money back? Or is it on a case-by-case basis?

Obviously this is to stop assets being stripped prior to bankruptcy, but it seems a bit harsh given the possible timescales.

Edited by Maxf on Thursday 25th September 21:30

[Chilli]

Take the £4k in cash out of the bank, and tell them you gave it back to him. He can then tell them he spent it. If he sees the good mate that you are, he'll cover for you, surely.

[mattley]

marcusjames said:

a few years back so I lent him £4k to see him threw. 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, with my knowledge, he filed for bankruptcy.

Time scales and proof or at least good evidence of where funds were allocated along with the conditions of the loan are key here.

As you gave him undocumented cash and he repaid in documented form it'll look like just salting money away prior to BK and will be pursued.

Hopefully he can demonstrate the truth of your story. Even though you lent him cash for his mortgage arrears if he can show that just after getting your cash he paid off 4K mortgage arrears ( which I assume was required in order for him to actually sell the place), and then after getting his equity he repaid you immediately which was a condition of the loan agreement (as I assume it was) then I can see no reason for this transaction to be considered in the BK, especially as he managed to trade for another ten months before going under.

[Broccers]

So, as I said above, you tell the people it was lent 8 years ago in cash ... easy.

[Broccers]

anonymous said:

[redacted]

It's very easy to prove friendship.

edit for formatting

Edited by Broccers on Thursday 25th September 22:17

[Broccers]

How can they prove a friend did not lend another 4k in cash at any given time if the monies weren't transfered into a receiving account ?

Honest question.

Edited by Broccers on Thursday 25th September 22:16

[mattley]

anonymous said:

[redacted]

But if the OP's friend can demonstrate the circumstance and the conditions of the loan why would it be in the BK?

[marcusjames]

He took no advice when filing for banruptcy. Even the advisor hinted that he probably should have claimed that he'd spent the equity rather than paying off family and friends. He's a little too honest :-)

I do appreciate that there are business creditors out there with legitimate claims on any equity but I do feel pained that I tried to help a friend and could lose the lot. Ho hum, a lesson for us all.

[SJobson]

How many others had lent him money and been paid back in the last 5 years? If it's hundreds of thousands in unsecured bank loans etc (mortgage won't count because it's a fixed charge), then your £4k is a drop in the ocean and I'd be telling the bankruptcy trustee to get that repaid before pursuing you. Nothing to do with legalities, all to do with practicality.

[Jasandjules]

You lent him 4k BUT was that for his Private or Business affairs? I assume he was a Ltd company?

[marcusjames]

When he sold the house in Oct 07 he had creditors for £50k, of which £20k were personal (his retired father lent him £12k from his pension lump sum for the initial deposit). He paid the personal creditors and spent the difference in day to day expenses.

He is a sole trader.

Rightly or wrongly I think he hoped that filing for bankruptcy would make all the pain go away.