Can our son buy our house? Unsecured business overdraft

[seaholly]

Hi,

We are in a financial mess. My husband and I are partners in our own business. The business has an unsecured overdraft facility which we are near the maximum of. Just now, our son can't afford to buy our house outright but could probably afford to buy it from us for just over 50% of its value. The cash wouldn't clear our overdraft but would make things a little easier for us. We are happy for him to do this but are worried that should things get worse and we have to declare ourselves bankrupt further down the line, would a court take a dim view of this and reposes the house from our son (because of the 50% purchase price)? We would continue to live there and our son and his wife would convert and extend the house and live there also.

Any advice greatly received. Thank you

[Eve]

Be very very careful selling any assets off at an undervalue as should you go into insolvency then a dim view would be taken of you being seen as trying to get rid of assets for less than they are worth to the detriment of other creditors, especially to family. Transactions can also be set aside.

[seaholly]

Thanks Jenna. The sale of the house will probably mean that we can survive but the last thing we want is our son to have a mortgage on a house that is then taken away from him by the courts. He is also an employee of ours and we do owe him around three months pay. I know it's no where near enough to balance the value of the house but we're just trying to explore every option available to us. Thank you

[dotty.]

why don't you sell the business ?

[Eve]

I would have thought it would be tricky to get past lender's solicitors in any event, decent ones anyway, in the circumstances, too risky for the lender. The undervalue should be picked up and questioned straight away in the circumstances I would be very surprised if the mainstream lenders would lend in such a situation due to the risk.

Getting professional advice as to the best way forwards to protect yourselves as much as possible could be wise.

[seaholly]

Hi Mark,

The overdraft is too large to sell the business on, we couldn't clear the overdraft.

[jomifl]

You could sell your son a 50% share, I don't think it could then be sold in a bankrupty settlement, but check with a lawyer.

[seaholly]

Thanks Jenna. I think I'll make an appointment with a solicitor in the morning

[seaholly]

Thanks jomifl, that sounds promising. I will definitely look into the possibility of it

[Graham-W]

Would your son be able to get a mortgage, considering he has had no income for the past three months?
Without an income, how could your son convert and extend the house?
You're building up a web which is unsustainable and likely to leave you son a debt he can't afford and for which he is not responsible.
Speak to your accountant and your bank manager.

[seaholly]

Hi Graham, our sons wife has a very good income and could get the 50% mortgage on her wage alone, hence why he has been okay without wages for the last few months. I think that a lawyer is our best step forward, and depending on the outcome we will have to see our own bank managers. Thank you

[bednobs]

hiya, what basis is your business on? Couldn't you wind up the business and get jobs working for other people? or at least your son could get another job?

[tonywiltshire]

You are taking the correct action in seeking advice from an experienced solicitor after providing them with full information. If you were to be made bankrupt and an undervalue transaction has reduced the assets available to the creditors they can, given the right conditions, apply to the court, which can set the transaction aside and order the parties to revert to their starting point.

[themas]

If you sell a 50% share & retain the rest, it definitely could be taken & sold in a bankruptcy.

If you sell it all at an undervalue & pay a market rent to your son for the part you occupy you just might be able to argue that the sale should not be unwound, but I wouldn't be at all certain about it.

Incidentally, there is a time limit applied to unwinding of undervalue transactions. They have to be reported in bankruptcy if they took place less than 5 years before, but the risk of unwinding probably reduces the longer the time has been.

But you mustn't rely on this - bankruptcy can come from action by your creditors & you can't predict when it might occur.

If your financial situation becomes dire enough, you might consider moving out, renting, letting the house be repossessed & making yourselves bankrupt. However, it is essential you take advice on this - preferably from an Insolvency Practitioner as solicitors are generally not well up on insolvency law & practice.