Vendors finance outstanding payment

[patrik6]

Vendor finances business that eventually goes broke money still owing does the vendor have to go to court to prove breach of contract in order to be able to persue payment?

 

[Tim W]

Are you the borrower or the lender?

 

[patrik6]

Are you the borrower or the lender?

borrower

 

[Tim W]

Your lender is a "creditor" - somebody to whom you owe money.
For bankruptcy (for individuals) and insolvency (for companies),
there is a priority order of who gets paid.

I'll make two suggestions - do a keyword search of earlier posts on this board, and
start thinking about getting help from a lawyer and an accountant.
This stuff is almost never DIY.

 

[patrik6]

Thanks i think bankruptcy solves the problem as the vendor is a unsecured creditor

 

[Clancy]

Thanks i think bankruptcy solves the problem as the vendor is a unsecured creditor

Bankruptcy solves the problem of creditors full stop. Regardless if secure or unsecured or even big bank creditor! The only type of creditor bankruptcy does not solve, are the 'break your knees' type of creditor!

 

[Tim W]

Understand this - personal bankruptcy is not an easy out.
By way of further information, have a read of this, and this.

 

[Clancy]

Understand this - personal bankruptcy is not an easy out.
By way of further information, have a read of this, and this.

That is personal bankruptcy, but winding up a business to evade debts is easy. In my job - selling construction materials to the building industry, it is a regular course of action for one person to have up to five businesses and they wind up and create new ones at least once a year (something to do with Tax benefits mainly). But occasionally my company gets ripped off and the guy simply starts a new company using the material he 'stole' from us. .... ok well perhaps its not 'easy' as such, but its just something the dodgy as hell building industry is very good at doing.

It just occurred to me, if you want the best advice on bankruptcy to escape debts - go ask a builder!

 

[Tim W]

That is personal bankruptcy

In fact, it's both.
It's not the transaction that's hard.
While the consequences later on for a bankrupt and a former director can be a bit different,
the mechanism of priority is common to both.

...but winding up a business to evade debts is easy. In my job - selling construction materials to the building industry, it is a regular course of action for one person to have up to five businesses and they wind up and create new ones at least once a year (something to do with Tax benefits mainly). But occasionally my company gets ripped off and the guy simply starts a new company using the material he 'stole' from us. .... ok well perhaps its not 'easy' as such, but its just something the dodgy as hell building industry is very good at doing.

You refer to "phoenixing"?
It can be unlawful, and yes, is a structural problem in business.
It's a bit like speeding - there's a lot of it around, but not everybody gets caught.

 

[Clancy]

In fact, it's both.
It's not the transaction that's hard.
While the consequences later on for a bankrupt and a former director can be a bit different,
the mechanism of priority is common to both.You refer to "phoenixing"?
It can be unlawful, and yes, is a structural problem in business.
It's a bit like speeding - there's a lot of it around, but not everybody gets caught.

Yea, but its more like the speeding of a car in front of police and the speeder saying nah nah nee nah nah you cannot do anything because i am not the director of the new company, my wife is, or my cousin is - this is how they do it, and therefore untouchable.