Will I lose my house if my limited company goes bust?

Will I lose my house if my limited company goes bust?If your limited company goes bankrupt, it is possible that you could lose your house if it was used as collateral for a business loan or mortgage. This is because the lender has the right to seize the collateral in order to recoup their losses.

If you personally guaranteed the loan or mortgage, the lender may also try to collect the debt from you personally, which could include going after your personal assets, such as your house.

However, it is important to note that this is not always the case, and the outcome will depend on your specific circumstances. If your house was not used as collateral for any business loans or mortgages, it is unlikely that you would lose your house as a result of your limited company going bankrupt.

It is also worth considering whether you have any other options for restructuring your business or finding alternative sources of funding, which may help you to avoid bankruptcy and keep your house.

What does it mean to go bust?

If a business venture goes bust it simply means that there is no longer enough cash in the company for it to survive. It will therefore enter a terminal insolvency process, such as administration or liquidation.

A business that has gone bust will owe money to creditors it can no longer afford to pay, meaning they will likely soon launch legal action against the company to recover any debt still owed to them.

Is my house at risk if my business goes bust? 

Normally, you will not lose your house if your limited company goes bust. The same goes for your other personal belongings, as they should also be safe even under these circumstances. This is because just as the name suggests, the liability is limited. Therefore, all consequences remain within the business itself and do not pass over to you personally.

However, you should be aware that there are certain sets of circumstances that will make you vulnerable. We will discuss these instances with you now.

Risks to your house when your company goes bust

There are a few exceptions whereby directors of companies may be held personally liable for some debt, This could have a detrimental effect on directors in regards to losing their homes.

If you personally guarantee a company loan

On the off chance that the business you own has a poor credit record, is small or not established enough, financial providers may request a personal guarantee before awarding you with a loan.

At the point when the opportunity arrives, if you can’t repay or if your limited company becomes bust, the creditors will come to you for reimbursement. You will be expected to take responsibility in this instance. If you cannot afford to make the required repayments, your home and some other personal possessions might be in danger should you be made bankrupt.

Offered a lender a charge over your house

When taking out a business loan, the lenders who give the advance might be concerned that you may not be capable to repay it if something goes wrong, so they could request a charge over your home. If your company goes bust, and subsequent creditor CTIONS, like calling on personal guarantees, implies some lenders will be left out of pocket.

In this case the moneylender might demand a charge on your property as additional security. This will imply that it will be paid before other creditors if the property is sold.

If you have an overdrawn director’s account

It is very normal for directors to have an overdrawn loan account. This is the point at which the director removes cash from the organisation for personal use, however it should be reimbursed sooner or later and accounted for as any other transaction would be.

The issue comes when the business loses everything, and the advance isn’t repaid. The outlet or manager for this situation will seek out the cash, as you are an indebted person of the company. Personal bankruptcy is a danger that could mean repossession of your home.

If you are found to be guilty of wrongful trading

As the licensed insolvency practitioner explores the conduct of the director(s), as a component of the indebtedness cycle, they might track down that you, as the owner have overlooked creditor interests and instead heaped on extra debt realising that it couldn’t be reimbursed (an example of wrongful trading). This is a significant break of the Insolvency Act and may well bring about you turn out to be by and by obligated for a few, or the entirety of the corporate debt. Such activities against directors are uncommon yet none the less they do occur.

What next? Expert Advice is just A click away

Thus, if you have gone about as a director with no personal guarantees, you haven’t unjustly exchanged and you can reimburse your overdrawn director’s account, then, at that point, you don’t have anything to stress over. Your home isn’t in danger. In case you are uncertain or might want any further exhortation, feel free to get in touch with one of our experts today.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.