Getting caught up in someone else's bankruptcy

[ste_5150]

Guys,

I'm wondering if anyone is able to offer advice, or past experience? This is purely on a personal level, so not related to any self-employment issues or payment for work or anything like that. Basically, I let money to someone a couple of years ago to help them out. They then repaid that money in July of this year (we're talking most of the way to 5 figures by the way), as I couldn't continue to fund it for them any longer. It turns out that they repaid it using credit, as they had no other option, and made a few payments but struggled a bit, so contacted the CCCS. Through them, they set up a payment plan, which one of the creditors wouldn't accept. The creditor continued harrassing them, to the point where they then decided to file for bankruptcy, which went through last month (november).

Herein lies the issue. The Insolvency Practitioner has now sent a letter to me saying that the payment to me could be considered a preference under section 340 of the Bankruptcy Act, and have asked me to contact them to arrange payment terms to refund the money and explain the reason for the payment. I am very worried about this, because I just bought a house, and I don't have access to that kind of money.

I have read that section of the bankruptcy act, and also section 341, which explains the definition of 'within a relevant time' and I do understand it but I'm convinced that, to the letter of the law, they could get away with it if they don't accept that it would be immoral to do so. I also know that the section states that they can apply for a court order to recover the money, not that I have to pay them just on the strength of their letter (which uses phrases like "may be recoverable" and "could be considered a preference" rather than specific reference to the fact that it is officially recoverable). I guess I'm asking for advice in any form, but more specifically once I have responded with a very carefully written letter is there any hope that they'll see sense??

Lastly, I know some may be tempted to put down the person I lent the money to, but believe me there are circumstances that sometimes really do justify people's situations, and bear in mind that I haven't explained that person's back story so you are not in a position to judge - I'm (rather desperately) looking for constructive advice towards resolving my situation.

Sorry for the long post!!

 

[BigShot]

I'm gonna have to pick my words carefully here.

Anything you say in any response can't be carefully worded enough. Unless you're a legal bod with direct experience in this field you are running a big risk entering into communication with them.
If I was in your position I'd be thinking very hard about getting legal representation to defend your interests as by the sounds of it you stand to lose a substantial amount.

In a completely unrelated issue someone I know sent a "carefully worded letter" which, read properly wasn't any kind of problem and it caused an absolute s*** storm! One wrong word (and I mean wrong to the kind of people who make a VERY good living out of making words say what they were never meant to say at all) and you'll be causing yourself an even bigger problem.

It's admirable that you are holding the personal aspect of this in a good light and a testament to you that you won't bend to thinking ill off them - instead choosing to understand their situation and look from their point of view.
As you said, no slur against the people you lent to, but you're NOT dealing with friends now. You're dealing with a legal team who WILL do what they can to take your money to pay someone else's debt. Don't try to be nice about this - there's plenty of time for that when your interests are safe - treat this as the serious situation it is.

Advice on a forum is not what you need right now - you need real help and you need it sooner than later. It might be hard to afford, but it will be much harder to afford a refund and that's something you may have a hard time defending on your own.

By all means look for support or even suggestions of avenues, representatives and the likes on here - but take it as "advice on the internet" - not legal advice.

It sounds like a snotty situation and I hope you can get it straightened out soon enough - but in the mean time, get help.

Good luck.

 

[Boatfixer]

To me this really sounds like the sort of situation where you need professional help - Whilst we have some great advise available on the forum with this sort of money at stake in what could be a complex situation please don't rely on an internet woodworking forum..... Having said all that I hope someone who knows what they are talking about come up with some sensible help for you.

 

[ste_5150]

That's good advice BigShot. Thank you. I was considering getting further advice and representation, but to be honest, I really don't know where to start. Do I just Yellow Pages a solicitor....?

Edit - thanks also Boatfixer. To be honest, even though this is a woodworking forum, I have already achieved what I'd hoped for - I really needed some independent, impartial opinions and advice about how to approach this. You're not just sawdust makers you lot, you know! :lol:

 

[woodbloke]

We have a 'legal eagle' on the forum (Jake) who gives sound advice on all manner of legal issues. Might be worth a PM to him, but for my money (and I know nothing about this sort of stuff) I'd go with other's recommendations and seek professional assistance - Rob

 

[BigShot]

I'm not EVEN a sawdust maker yet... still trying to get the time to empty that ******g garage so I can get my shop set up

Where to start? Hmm.
That's trickier to answer. On one had I'd be inclined to suggest popping into or ringing your local citizen's advice bureau and asking them. On the other I dunno if they'd be able to recommend a "good" one, though they could possibly tell you what kind you need.

I know I just told you advice off a forum wasn't what you needed, but for some reason I feel like you might be able to get a some sort of answer on that front on forum of the MoneySavingExpert website. Maybe not but it's a thought.
There are a hell of a lot of opinions on there - but there are some good eggs too.
EDIT - That is, advice about what sort of representation and maybe suggesting a good one... not the legal advice I think you need. - EDIT.

I don't suppose you know any legal types do you? Maybe you've got an accountant who could suggest a good representative?
Do you attend a church/shul/temple where someone might have been in a similar situation and could advise? Maybe there's some BigShot () legal bod who attends too and could help.

Maybe some down the local?

While I'm glad I've never faced such a situation, I'm afraid that means I'm drawing a blank on any direct advice or suggestions at this point.

Again, good luck.

 

[wizer]

I agree that you should seek proper advice. But can someone explain to me how on earth this can be legal? Where is the sense in taking money from someone because the person who paid it is in debt? It's infuriating!! :evil: :evil:

 

[head clansman]

hi

do you have any written proof that you lent these people that amount of money, i think the insolvency people are trying to establish these people haven't used you to stash money away before they declared there selves bankrupt if you can prove you lent them the money and it was repaid before they went bankrupt i cant really see any problems . hc

 

[ste_5150]

I agree that you should seek proper advice. But can someone explain to me how on earth this can be legal? Where is the sense in taking money from someone because the person who paid it is in debt? It's infuriating!! :evil: :evil:

I agree... The approach they seem to be taking is that I have received a preference over the bankrupt party's other creditors, and as a creditor it would be unfair for me to have my funds returned to me in full, and other institutions to receive nothing. Which, I guess if you look at it totally coldly and at a very high level, makes sense. But when you start looking at who the creditor is, and what effect that would have on them (me), then it just lacks justification.

At the end of the day, bankruptcy is a personal thing, and to force someone to take on a massive personal debt due to comeone else's backruptcy is plain immorral, even if the letter of the law does allow it.

I know literally no-one in the right field, so it looks as though I may have to take a punt at finding a good solicitor on Yell.com to speak to. Any quickly, I think - they put a 14 day time limit for reply on their letter, and they seem unlikely to cut me any slack.

Sadly, I worry that it is questionable as to whether it's worth figthing, beacuse I could potentially be left with a legal bill on top of the original problem... I'll have to make an initial enquiry with a solicitor, but if it's unlikely I'll win from a legal perspective then all I can do is pay and avoid further costs. How I do that, I don't know, but I'll have to find a way.

It's not been a good few days...

 

[ste_5150]

hi

do you have any written proof that you lent these people that amount of money, i think the insolvency people are trying to establish these people haven't used you to stash money away before they declared there selves bankrupt if you can prove you lent them the money and it was repaid before they went bankrupt i cant really see any problems . hc

Yes, that thought did occur. Unfortunately I don't have anything concrete for the full amount we're talking about as it was over a period of time, and for a number of things, but I do have some transactions showing transfers. I think I'll try and dig around and see what I can find before going to the sols.

Good point by the way - I suppose it does look quite bad from that side, but how I prove that that isn't what it was about - that's going to be hard...

 

[RogerS]

First off, hats off to you, Ste, for being such an honourable bod about all this.

i second the advice re getting proper legal advice. But not from just any Tom Dick or Harry solicitor. You need one with knowledge of bankruptcy.

In fact, i wouldn't post any more on any forum until you have done so (other than a Pm to Jake who should be able to point you in the right direction even if it isn't his area of speciality).

One low cost initial foray might be to stump up the small amount of money and join Which Legal and ask them in the first instance although they do focus on consumer issues and so this might not be for them.

Hope it resolves itself.

Roger

EDIT: actually an accountant might be a good port of call.

EDIT EDIT : There is an excellent Q&A page in the Financial Times weeked Money supplement. Might be worth a shot there. The advice is pretty well top notch.

 

[BigShot]

I say this with great caution, because if I'm incorrect it could be a lot of bother...
...if they are just a legal firm or something, their "14 day time limit" isn't the kind of "14 day limit" a court might impose... though as I've said I don't know the laws there and maybe it is legally defined.

My suggestion on that front, too, is to get legal advice.

Talk to Citizen's Advice... there may be some sort of legal aid funding or something - though that might be limited to some rubbish lawyer (though not all legal aid lawyers are rubbish) - I don't know, you'll need to find out.

Either way it sounds like you need to get moving on it sooner rather than later.

Aside from that, if your financial records aren't already in good order, get them all out and sort them now. Any bank transfers, cheque stubs, letters, emails, and absolutely anything from payment receipts for something you bought for them down to an I.O.U. on a beer mat that relates to this money you lent them needs to be at hand and ready to use if you end up defending this claim (and I'm sure you will - I can't imagine the cost would come anywhere close to the cost of losing the lot - though again, what do I know?).

I'll say this though... it could be a smart move to contact solicitors before you start digging for your records. That way someone who can help is aware of it, on your side, can make an initial response to the letter you received and so on.

I agree with Roger that you need a specialist on this.

 

[head clansman]

hi

well if you have transactions between you on paper , for most of the amount and it was repaid prior to there bankruptcy. I would view that as a business loan being repaid, i suppose it could be view as suspicious though depending on how long before these payment took place before they went bankrupt , this is why you need the legal advice of an expert , try to see if you can find a solicitor who will do a no win no fee ,(i used them on one occassion paid dividends) if you can that will take the worry away from you , quite often see them advertising on the tv . hc

ps just re read rogerS last comments if you have an accountant that will be a good port of call for advice.

 

[ste_5150]

Thanks for the advice all. I'm following as much of it up as I can. I've sppoken to the CAB and they directed me to a solicitor who couldn't help, but who did direct me to an insolvency practitioner. I'm waiting for a call back from them now.

I think the difficulty is that I feel like the letter they've sent is the first stage of investigating whether or not I'm doing what HC mentioned - putting money aside on behalf of the bankrupt person before they go bankrupt. There is evidence that that isn't what I did, but I don't know if it's strong enough - it may not be - because none of this was done even thinking that this may happen, so I'm left in a very difficult place. I either stump up now and write it off, or I risk arguing with it and they take it to court and potentially both I and the other party end up with criminal convictions for a fraud we didn't commit! And I can't risk that because I work in finance so that would be the end of my career, and I know for a fact that it would end the other party's career as well.

Here's hoping that further advice yeilds something supportive....

 

[Dibs-h]

Ste - do you have some sort of legal expenses cover provided by your household insurance? If so - that might cover this sort of thing.

Picking a solicitor out of Yell might not be the cleverest thing - you could just as well end up with a muppet. You really do need someone specialising in it. PM Jake to see if he can recommend someone.

 

[pren]

Hi.

Crappy situation you've got!

I can recomend Gamlins as a good solicitors in your area. They've got a branch in Holywell so it's not too far from you, as well as others along the north wales coast.

They represent my boss on a number of fronts and he rates them.

Hope that helps!

 

[Boatfixer]

But can someone explain to me how on earth this can be legal? Where is the sense in taking money from someone because the person who paid it is in debt?

Wizer - imagine you are a supplier owed money by one of your customers - he pays off another supplier in full leaving you with nothing as he slides into bankruptcy. Would you not try and get a share of what was owed to you from the other supplier? Especially as it was the paying off of the other supplier that left nothing for you?

I think this is a worrying and potentially complex case and the sooner the OP gets proper legal advise the better. Dibs suggestion of checking to see if you have legal insurance with house or motor insurance is a good one.

All I can really say is good luck and I hope it all gets sorted without too much hassle.

Graham

 

[BMac]

Ste,

The advice you have received here is very sensible.

Please get good counsel.

Brendan

Edit today: I removed the body of the message because my point was made and illustrated so I now want to protect my privacy in the event of an acquaintance passing by and putting two and two together.

 

[ste_5150]

Thanks all for your replies. I eventually tracked down an insolvency practitioner who was very helpful. She basically explained that there is no question about it - I have to pay that money to them because it was paid to me in the last 2 years. Which sucks.

However, she did also give me a few insider tips, in that I may be able to negotiate a part-payment, so although it's going to be a lean Christmas, it may not be as bad as originally thought.

Thanks again for all of your support on this guys - your advice led me to the right place. I owe you all a pint. Wait, scratch that.... :lol:

 

[Dibs-h]

Thanks all for your replies. I eventually tracked down an insolvency practitioner who was very helpful. She basically explained that there is no question about it - I have to pay that money to them because it was paid to me in the last 2 years. Which sucks.

However, she did also give me a few insider tips, in that I may be able to negotiate a part-payment, so although it's going to be a lean Christmas, it may not be as bad as originally thought.

Thanks again for all of your support on this guys - your advice led me to the right place. I owe you all a pint. Wait, scratch that.... :lol:

No probs.

Part payment, worth exploring. Worst case scenario - I'd offer them half, both lots might as well loose half of what they are owed. Why should the little guy bear the whoel brunt of it.