Can't pay suppliers

[Conan]

I m just wondering how much a CC does protect it members. It seems that all persons who does not intend to pay their debts open trusts. Recently I have been done by debtors sequestrating themselves (again.) The first time I was forced to follow the same route in a different industry and as a sole trader. That's why I started a CC with my wife and her mother as the only members. They signed for application for accounts with suppliers. The CC is basically dormant now but there is still some debt that needs to be paid. I don't have the finances to pay the debt of +- R100000 and won't have in the near foreseeable future. I'm not sure but I think that the terms of the suppliers were that the members could be liable for the debt in their personal capacity.(It is big national companies with approval for accounts coming from head offices so I guess it comes standard in their terms). I can't let my mother-in-law be sued for something she had nothing to do with. She is still unaware of the debt and was only part of the CK in name. Legally I am not part of the CC but in reality I was the sole trader and should have been liable for debt and if there were profits it would have been only mine. What can be done??Do I (or the CC rather) have options? I've come to a stage where I just don't pick up the phone, the accounts had to paid about 4 months ago...

[Debbiedle]

Crappy situation Conan, but now is the time to come clean with everyone. You owe this money and the sooner you face the phones and the demands, the easier it will become. Do not get into the position where you are fearing the fear!

Tell your family the dangers. Make sure they have as much paperwork in files as possible as to who in personal capacity owns what. This helps the sheriff to understand if and when he comes around.

Simultaneously - phone these companies, tell them you owe and what can they accept, you do etc. If you ignore it you give them power. If you address it you control it. Good Luck!

[Dave A]

I agree with Debbie - this is about as ugly as it gets. If your wife and mother have signed personal sureties and they're worth suing, I'd expect the creditor to act against them. And they are perfectly within their rights to do so. I'm not sure even the National Credit Act will be of much help.

Legally I am not part of the CC but in reality I was the sole trader and should have been liable for debt and if there were profits it would have been only mine

So why are they the members and why did they sign the surety?

Conan, my best suggestion is to read Failing Forward by John Maxwell so that you can get your head together - and get to justifying your wife and mother-in-law's faith in you as soon as possible.

As someone who cost my wife her dream house along the way to where we are now, I can testify that the road ahead is not going to be easy. But if your marriage survives this, if you work on yourself and do the right things, getting to the other side is so sweet it's worth the effort.

It sounds like where you are now has moved beyond crashing and it's probably too late to avoid the consequences. What you need now are the tools to bounce back as quickly as possible. Get that book.

[Conan]

I agree with Debbie - this is about as ugly as it gets. If your wife and mother have signed personal sureties and they're worth suing, I'd expect the creditor to act against them. And they are perfectly within their rights to do so. I'm not sure even the National Credit Act will be of much help.

So why are they the members and why did they sign the surety?

Thanks Dave and Debbie for your replies. Not really comforting though but the truth never the less!

They were members because I started the CC soon after I was sequestrated under completely different circumstances. At first I worked on a cash only basis, but in order to keep up I had to open accounts with suppliers. I guess I was pretty naive because I never thought that somebody would not pay me. It started going badly when I used literally all of my money for a project and the guy just never paid me. My lawyers are still busy to try and recover the money but I'll probably never see a cent. That forced me to open the accounts and it was going fine until I took a second knock with another client declaring bankruptcy. I tried to pay my suppliers with money from other projects but started paying slightly late which forced me to go to other suppliers and buy cash again, I just never had enough to pay the suppliers and have enough left to keep the business running.

My only chance now is to land a huge project and borrow the money to finance it from my mother-in-law, which she will do, but you can imagine how scared I am now, what if the same thing happens. I don't feel too enthusiastic to go through all the trouble to find these larger projects, but if I do, at least I'll be able to pay some of the money owed to the suppliers and be able to make arrangements, if I don't get screwed again.

I just have to put my mind to something again and start over. A few years ago I was able to make a success of everything I touched but when it turned it turned badly, it's like nothing works out the way it should since I came crashing down 2 years ago, lost 2 houses and everything else.

My marriage will survive it though, no problems there, I just hate it that I am not able to provide her with the life she deserves and in a way became used to.

Anyways , I'll find a way.

Will get the book, can't hurt!

[Dave A]

It's good to hear you've got that support behind you. Good luck.

[Chatmaster]

Conan, this is really terrible to read, this might be a long shot. But the only way I can see for you to get this sorted out is to firstly take ownership of the CC (If you are legally permitted). In other words you must become the sole member of the CC ASAP. By doing so you become directly responsible for its debts.

Dave such good advice as usual.

The more I think about it the more I believe that a CC has more problems than a Sole Proprietor, except maybe for SARS(tisk, tisk). These days the separate legal entity simply doesn't matter any more as most accounts includes a clause that makes members of CC personally liable. I see Pty's in a very similar way when it comes to risk. That is why my latest business ventures are all done using Trusts, it costs more but it is certainly worth it.

[Sieg]

my bit:

Go see an attorney. There may be other options open to you and the members may (might?) not be personally liable for the debts of the close corporation. There is the possibility of liquidating the cc or placing it under a sort of "judicial management" or doing a friendly offer to creditors (say 40c in the Rand).

Go see an attorney (Yes, I repeated myself).

And, make him / her have some enthusiasm towards your matter by putting some money in the attorneys' trust account.

Sieg

[Tok-a-lot]

I have just read this and it is a sorry situation.
One of the things you could do is perhaps look at is to go to a good financial professional and look at putting the company under debt administration. This could buy time (3 months), while the financial professional negotiates payment terms.

The NCA should cover a loan to a company of up till R250 000 and a few other factors such as the turnover being below a certain amount.

However keep in mind if you sign surety for a company loan that falls outside the NCA, even though the individual is covered in their personal capacity if they loan the money in their own name, this is not so if you sign surety for a company, where the loan falls outside the NCA.

[Conan]

my bit:

Go see an attorney. There may be other options open to you and the members may (might?) not be personally liable for the debts of the close corporation. There is the possibility of liquidating the cc or placing it under a sort of "judicial management" or doing a friendly offer to creditors (say 40c in the Rand).

Go see an attorney (Yes, I repeated myself).

And, make him / her have some enthusiasm towards your matter by putting some money in the attorneys' trust account.

Sieg

That's exactly what I did (see an attorney), not for the first time, but this time the right person. It seems all is not so bleak after all. The CC is going to be liquidated and nobody is going to be responsible for any debt in their personal capacity . It's going to cost me a few thousand in legal fees but at least I will finally be able to make a clean start. I can't explain exactly how he is going to do it, but there is legal ways that it seems usually only the very rich have access to. This guy is making a nice living by helping people and business like me by being quick and efficient. Rather than targeting the already rich and "powerful" and helping them getting richer by screwing normal guys, he is helping your average income guys to find solutions. I'm not proud of doing it this way, but it's the only way. I don't want to spend my life paying of debt. Obviously, I am going to spend a debt free life from here on, not even a credit card in this house, well perhaps just for online purchases , but no debt.
I am also changing my line of work. Problem was I used to be in high risk sectors of the economy, where it is the order of the day to make money by writing of your debt by the top of the chain guys, resulting in a snowball effect-crushing avalanche that wipes out everything in it's path.

Not anymore, new start as soon as this Monday. Hard work once again but very good prospects and low risks. I have to say I was very fortunate this week and I am lucky to get this chance.

Thanks for you replies.

[Dave A]

Here's a really good article on getting out of debt. The one part I really wish people would realise and take to heart:

We had quite a few medical bills that we just couldn't pay. We contacted the service providers and asked if we could pay them off over six months. It wasn't an easy thing to do because we had to swallow our pride, but we were amazed by how accommodating people can be. In every situation they agreed.

The fact that we had contacted them before they had to spend money on debt collection gave us credibility.

So true. And if more people did this, it would save so much trouble and extra expense.