Getting started

Advice from our website

You can view this website to get detailed information to help you deal with your business and personal debts. You can also use fill in sample letters to send to your creditors and use our online tool My budget to work out what you can pay.

Extra help if you have mental-health difficulties

If you have mental-health difficulties, extra help is available to support you.

There are a number of organisations that may be able to provide you with different types of support.

Anxiety UK supports those living with anxiety disorders by providing information, support and understanding through a range of different services.

Mind provide confidential advice and support to anyone experiencing a mental-health problem.

Rethink Mental Illness has a national helpline and locally-run services and support groups for people living with mental illness, their carers and relatives.

Samaritans are there to help you explore your options, understand your problems better, or will just be there to listen.

Sane provides care and emotional support for people with mental-health problems, their families and carers as well as information for other organisations and the public.

Extra guidelines apply to many organisations that you are in contact with. We can explain these guidelines to you and how you can use them to help deal with your debts.

Companies that charge for advice

You may come across companies that offer to sort out your debts if you pay a fee. Be very careful to look at what the company is promising to do for you before sending them any money. Some of these companies say they will get your creditors to write off part, or all, of your debts. Unless you have special circumstances, this is unlikely to happen.

Ask the company if they are authorised by the Financial Conduct Authority.
The Financial Conduct Authority has issued its Consumer Credit sourcebook (CONC) setting out rules and guidance for debt management companies. You can use the rules and guidance to make a complaint if the company does not follow them.
You can make a complaint to the Financial Ombudsman Service if you are not happy with the outcome of your complaint to the company.
Professional advice on dealing with your debts is always available free from agencies such as Citizens Advice, money advice centres, or by ringing Business Debtline. Remember, instead of paying fees to a debt-management company, you could be better off using the money to pay off your debts instead.

Use free advice

You could better spend the money you pay in fees by paying off your debts.

Golden rules

If you follow these golden rules, you won't go far wrong. Remember, if in doubt - get advice. We are here to help and you are not alone.

It is never too late to get advice.
Don’t borrow money to pay off your debts without thinking carefully. Get advice first. If you own your home, this kind of borrowing could lead to you losing your home.
If you have lost your job, closed your business or are off work because of illness, check whether the payments you need to make are covered by payment protection insurance. Check your credit agreement. Contact the insurance company or your lender to find out more details about how to claim.
Check you are claiming all the benefits and tax credits you can.
Check your business status. This will help you decide which budget you should be using and what debts you are responsible for.
If you are a sole trader, a partner in a partnership or a director of a limited company you can use My budget to work out which is the right budget for your business status.
Your budget is an essential tool when dealing with your debts. It will help explain your financial situation to your creditors.
Once you have completed your budget use Step 3 and Step 4 to work out the best way to deal with your business and personal debts. Your budget can also help you work out the best way to manage your business. If you are unsure, contact us for advice.
Make sure that any money you receive (for example, business income, wages or benefits) goes into an account at a bank or building society that you don’t owe any money to. This means the bank or building society will not be able to take any of your income to repay your debt to them.
Make sure you tackle your priority debts first – for example, debts which could mean closing your business, losing your home or having your gas or electricity cut off.
If you decide that it is the best option for you to try and come to a payment arrangement with your creditors yourself, My budget will work out reasonable repayment offers to repay the money you owe.
Make sure you use one of our sample letters when you write to your creditors with a payment offer.
Contact everyone you owe money to. If you make arrangements to pay some creditors but not others, you could run into difficulties again.
If the first person you speak to is unhelpful, ask to speak to somebody more senior who may be able to agree to what you want.
Don’t give up trying to reach an agreement, even if creditors are difficult.
If a creditor takes court action, don’t panic. Fill in the reply forms to court papers and let the court have all the facts. The court will use this information to decide if you owe the money and what instalments you should pay.
Always go to court hearings. Take a copy of your budget with you. Don’t think that going to the County Court makes you a criminal. It’s not that kind of court. They will not send you to prison and there is no jury. There are money advisers who may be able to represent you in court. Check the Law Society’s website for details of agencies providing advice in your area.
Always keep copies of any letters or court forms you send or receive.

Court action and extra help

We are always here to give advice about letters and forms. We can explain what you need to do if you asked to go to court.

Business status

There is a lot of confusion about what it means to be a sole trader, partnership or limited company. These terms are used to describe the status of a business. Before starting to deal with your debts, it is important that you understand which term describes your business and which budget you should use.

Which budget?

If you are a sole trader, a partner in a partnership or a director of a limited company, you can use My budget to work out a budget. You can use this budget to help negotiate with your business and personal creditors and choose the right debt option for you and your business.

Sole trader

This is where you are an individual and work for yourself. You may also have people working for you. All bills, bank statements, invoices, letterheads and other business correspondence have just your name on them. Even if you trade using a business name, you cannot separate yourself from your business debts.

You are personally liable for all of your business debts. This means you have to pay these debts out of your own income, even if you have stopped trading. If you do not pay, the creditors you owe money to could take further action against you personally. If this happens, both your business and personal assets could be at risk. Our sole traders fact sheet has more information about how to deal with sole trader debt.

Partnerships

A partnership is two or more people carrying on a business, with the aim of making a profit. A partnership must have at least two partners. Most partnerships can have no more than 20 partners, except for firms of solicitors and accountants.

By law, you do not have to have a written partnership agreement, though you may decide it is a good idea to have one. Otherwise, all you need to do to show you are a partner of the business is put your name on the business notepaper as a partner.

In a partnership, all partners are liable for the partnership's debts. This is known as ‘joint liability’ and means that creditors can take all partners to court for the total debt owed to them by a partnership. A creditor may take action against only one partner to recover the whole debt that is owed to them. Partners may have to pay debts out of their own income, even if the partnership has stopped trading. Your business and personal assets could be at risk. It is not possible to divide up liability for the debts. If creditors cannot get one partner to pay the debt, they may claim payment in full from the other partners.

If you leave the partnership, write to all the business’s creditors to make sure they know that you will not be responsible for any new debts after the date that you left. Keep a copy of all the letters you send. Make sure that your name no longer appears on the business’s notepaper and ask the bank to take your name off any business accounts.

If you have given a personal guarantee or a legal charge to a bank as security for the business’s debts, make sure the bank accepts that you are only responsible for any debts that built up before the partnership ended. A personal guarantee means you have signed an agreement to say you will pay the money back yourself, even if the business closes. You need to do the same thing for any business overdrafts.

If one partner goes bankrupt, although creditors will cancel the debt for that partner, they can still try to get the whole debt back from the other partners. This means that partners with the most assets have the most to lose.

If you have had to pay a partnership debt, you have the right to take the other partners to court to get back the money for their share of the debts. If one of your partners has paid a partnership debt, they can take you (and any other partners) to court to get back the money for your share of the debt. Read our business partnerships fact sheet for more information.

Income tax

Partners are taxed only on their share of the business profits. If one partner owes income tax, HM Revenue & Customs (HMRC) cannot claim it from the other partners.

Limited companies

A limited company is legally separate from its directors and shareholders. In a small limited company, the directors are often the shareholders.

A company must have at least one director and, in some cases, will also have a secretary. It needs to be registered at Companies House and must send audited accounts to Companies House each year.

By becoming a director, you agree to act in the best interests of the company, its shareholders, its employees and its creditors. This is called a ‘duty of care’ or ‘fiduciary duty’. Usually, if you are a director (or acting as a director), you are not personally liable for paying the company’s debts. This means that if the limited company does not pay its debts and a creditor takes court action, only the company assets are at risk.

However, you can be made personally liable for the following.

Your own PAYE and National Insurance payments.
Any income tax you have not paid on cash you have taken from the company.
Any personal guarantees you have given for the company (usually to banks, finance companies, landlords and major creditors). This is when you sign an agreement to say that if your business cannot pay the money back, you will pay it back yourself.
Any liabilities that have come out of your company after it has been investigated in relation to liquidation (a formal option to deal with the company debts and bring it to a close) and found guilty of wrongful trading. This is when you carry on trading when the company was insolvent and there was no reasonable chance of avoiding liquidation.
Any liability where you have benefited from a transaction at the expense of your creditors. For example, if you have bought a company asset for less than it was worth, or you have paid your own wages or directors’ loans from the company assets but cannot afford to pay your creditors. This is called ‘misfeasance’.
Any liability that comes from committing fraud while you were running the company. For example, fraudulently taking credit in the company name. This is called fraudulent trading.

Insolvent limited companies

A limited company is ‘insolvent’ if:

the company cannot meet its debts as they fall due;
the value of its assets is lower than the total debt that it owes; or
it cannot meet its debts as they fall due and has assets worth less than the total amount it owes.

If you are not sure whether your company is insolvent, contact us for advice.

Temporary measures for coronavirus

Because of coronavirus, the Government introduced temporary measures that suspended liability for wrongful trading. This means that a director will not be responsible for any worsening of the financial position of the company or its creditors that happened between the periods 1 March 2020 to 30 September 2020 and 26 November 2020 to 30 April 2021.

Personal guarantees

If you have given a personal guarantee, it means you have guaranteed to pay part, or all, of the debt back yourself, even if the business closes. Contact us for advice.

Trading when insolvent

If you are not sure whether your company is insolvent, you will need to be very careful when you are trading. Contact us for advice.

If you need more advice about your business status, contact us for advice.