How to handle Bounce Back Loan debt

Now, even we must admit reading agreements can take what feels like forever, and we’ve all been guilty of just pressing accept after barely skimming over some of them. However, even if you didn’t read the entirety of your BBL agreement, there is one condition in your agreement that was very important for you not to miss. Bounce Back Loans must not be used for personal purposes. This might seem obvious, but we have found that many people didn’t fully understand this condition and, you guessed it, used it for personal purposes.

Let’s come back to this later...

As we mentioned earlier, if you are unable to pay back the BBL, then the Government will swoop in like a knight in shining armour to save you. Not quite, but they will take over the debt and pay it on your behalf as the Guarantor.

What many don’t realise is that the lender must try every method possible to recover the debt from the business. Only once they have exhausted every possible method will the lender turn to the Government to settle the debt.

Sounds pretty straight-forward, right? It can be, but there are a few things you need to know.

Before the Government agrees to take over the debt, your business must have ceased trading or become insolvent. So, the likely course of action by the lender would be to petition for your company to be wound up. This simply means your business will stop, well… “businessing” (that’s not really a word). It means that your company will stop doing any business and any assets the company has will be sold and used to repay debts.

The goal for the lender would be for the court to agree with the application and grant a winding up order. Once this has been granted the lender can then approach the Government to settle the remaining debt after any money has been recovered from liquidated assets.

If you’ve made the mistake of using the loan for personal purposes, don’t panic. It’s important that you pay attention to this section.

The Government will only guarantee the loan if there has been no misconduct relating to the loan.

Misconduct can include any of the following:

• Dissolving your company to avoid paying the loan back.
• As we’ve mentioned already – using the loan for personal purposes.
• Providing false or misleading information on the Bounce Back Loan application.

An example of this last point would be stating a higher turnover figure than what your company has, e.g. declaring £250,000 as the company turnover when it’s actually £50,000.

If the company is in liquidation, the liquidators will look for areas of misconduct as part of their review of the company’s financial situation. Should the liquidators discover any misconduct, this will be included in their report and the findings will be passed to the lender.

As we said earlier, don’t panic, keep reading...

The most important things for you to know are these two points:

1. The bank wants the money and that is their primary focus.
2. The Government will not take responsibility for any debts they don’t legally need to.

People make mistakes, you aren’t the first and you certainly won’t be the last, in this case, you will be expected to correct the mistake. How? You might ask.

You will be expected to pay back the loan, so if are able to do this, other than a possible director ban for a period, you should face no further serious consequences.

If you can’t pay the loan back, keep reading, we cover this a little later.

There’s good and bad news. The good news is that, if you can, you may wish to consider clearing the debt yourself. Remember those two important points:

1. The bank wants the money and that is their primary focus.
2. The Government will not take responsibility for any debts they don’t legally need to.

Clearing the debt ticks both boxes, meaning that it will be unlikely that you will face any serious repercussions.

The bad news is that if you are unable to clear the debt, you may be taken down the liquidation route by the bank, as covered earlier.

We’re not just going to leave you like that, no way!

Even bad news has a bit of good news with The Real Debt Guy. The bank must look at all available options for you to clear the debt before applying for a winding-up order. This can include increasing the amount of time you have to clear it, which may result in your monthly payments being reduced.

Unfortunately, the bank will pursue you personally for the debt and, most likely, all the way to court.

If you own a property, then it is quite likely that the bank will apply for a “Charging Order”. Don’t worry, we have an article that explains what this means and how to handle it, covered here.

If you do not own a property, the lender will explore other enforcement methods which may include instructing bailiffs. Again, we have you covered on this too, read our article “Bailiffs – know your rights”.

We got you!

The Real Debt Guy is a qualified financial adviser and a UK debt expert.

The information in this article is considered to be true and correct at the date of publication.