Is my bounce back loan written off if I go bankrupt
- 14 Mar 2023
Did you take a bounce back loan during the coronavirus pandemic? If you can’t repay the loan, you can consider the option of going bankrupt to write the debt off.
Included in this article:
- Can a bounce back loan be included in bankruptcy?
- If you go bankrupt can you still run your business?
- What happens to your business bank account?
Rather speak to person? Give us a call (0800 044 3194) or click here to complete the form below and we’ll call you
Can a bounce back loan be included in bankruptcy?
Your bounce back loan is an unsecured debt. It will be written off if you go bankrupt. In this respect it is no different to any other business debt (loan, credit card or overdraft).
Although a bounce back loan is a business debt, if you are self employed, you are personally liable for its repayment. In other words, if your business can’t afford to repay it, the bank will chase you for the money.
If you don’t have sufficient personal funds to settle the loan, bankruptcy can help.
But isn’t going bankrupt something you should avoid? Of course there are various implications to consider so its not right for everyone. But one thing on many people’s mind is, if you don’t repay the loan, will you be accused of fraud?
The key here is how much did you borrow. The rule was that the amount should not have been more than 25% of your previous years earnings. As long as borrowed within this parameter and always planned to repay the debt, there should be no issue. If you borrowed much more than 25% of your previous year’s turnover you need to consider your options more carefully. Talk to us before going bankrupt.
Before making the decision to go bankrupt, there are some options to look at which might make repaying your loan easier. For example you are allowed to pay interest only for 6 months or take an additional 6 months payment holiday.
If you go bankrupt can you still run your business?
Yes, you can continue to run your business on a self employed basis if you go bankrupt. In fact, one of the advantages is that in addition to your bounce back loan, any other unsecured debts you have will also be written off. Even money you owe to HMRC. As such it gives you a clean slate.
The Official Receiver should also let you keep your vehicle as long as you use it personally to carry out your work and it is not excessively valuable.
It is true that going bankrupt is simpler if you are renting. Your home will be unaffected and your landlord is unlikely to be told. If you are a home owner, whether it is a sensible option for you will depend on how much equity is in your property.
You can continue to trade while you are bankrupt. Given you will be debt free, you will have the best possible opportunity to make your business work in the future.
What happens to your business bank account?
If you go bankrupt, general banking policy means you will no longer be able to use your current account. The bank will close the account. This is the case whether you have a bounce back loan with them or not.
However, this is not a reason for concern. You most certainly can have a bank account while you are bankrupt. More than one if you wish. However it will have to be a basic account.
Most banks offer basic accounts. They are usually free to operate and come with all the standard facilities you need (debit card, internet banking ability to set up standing orders and direct debits). It is just that you will not be able to get credit.
If you have a specific business account, this is also likely to be closed and you will have to make alternative arrangements for your business. Some banks do offer business accounts for bankrupt people. But if you can’t find one, it is possible to open second basic account and use this for trading purposes.
Want to find out more about whether you could write off your bounce back loan by going bankrupt? Give us a call (0800 044 3194) or complete the form below.