Business Debts

[GregL]

Hi,

My brother passed away 13 months ago and when sorting out his debts at the time we did contact Llloyds bank with whom he had a business bank account for a limited company he was the sole director of. While Lloyds did confirm the company was in debt after they received letters of administration, they never told us anything else and never got back to us after that so we assumed my brother had no personal liability. However Lloyds came back to us recently saying he signed a personal guarantee and want us to pay that amount back, is there anything we can do considering we contacted them several times to confirm over the past year and it took them so long? The estate has been passed to his children and is in children's bank accouts as they are still minors.

Thanks.

[Sam101]

Can you please clarify that it was the Bank that applied for letters of administration as there was no Will left by your brother and there were no other administrators of the estate?

If that is the case, then were the beneficiaries just the children and what ages were they then?

Also, who are the guardians of the children as you do not mention their mother/

As to the debt, it seems strange that the bank should be asking other members of the family to homor a debt of your brother unless you were also a guarantor of the debt.

Has any other member of the family seen the administration accounts?

[atticus]

EDIT as crossed with Sam101:

I did not read this as saying that the bank was the administrator, but if it was, it has the liability for paying money to beneficiaries without checking for claims.

But assuming the bank was not the administrator:

Did the administrators place statutory advertisements under s 27 Trustee Act 1925 asking creditors to notify details of their claims?

[GregL]

Hi Both,

Thanks for your answers. There was no will but it was the mother of the children (who was the guardian of the children and divorced from my brother), and I who both applied for the letters of administration, the children were 6 and 10 at the time and they are the only beneficiaries. When I enquired to Lloyds about the company's bank account / debt, they asked for those letters so I sent them to Lloyds so we could access the account's details. But after that they never got back to us until a year later.

We didn't know about statutory adevrtisements so we didn't do it at the time.

Thanks

[atticus]

You may be in a difficult situation, depending on the approach Lloyds take.

How much have Lloyds asked for? Could that have been paid in full?

I suggest that you explain to Lloyds that in the light of their first reply you had no reason to think that the bank had a claim against your late brother personally, and acted accordingly. The question will be whether they press their case.

EDIT: Did your brother have money in Lloyds accounts, which you were able to close?

[GregL]

You may be in a difficult situation, depending on the approach Lloyds take.

How much have Lloyds asked for? Could that have been paid in full?

I suggest that you explain to Lloyds that in the light of their first reply you had no reason to think that the bank had a claim against your late brother personally, and acted accordingly. The question will be whether they press their case.

EDIT: Did your brother have money in Lloyds accounts, which you were able to close?

The personal guarantee was for the account's overdraft limit of £25000 which the estate just about covers but is now in children's accounts. There was no money in the account as it was overdrawn by nearly £25000 which is what they're asking for.

[atticus]

To ne clear, I was asking if your brother had personal accounts, and not about the company account.

[GregL]

To ne clear, I was asking if your brother had personal accounts, and not about the company account.

No he didn't have any personal accounts with Lloyds, his personal accounts were with Barclays.

[atticus]

OK, that does not give an additional angle then.

[GregL]

OK, that does not give an additional angle then.

What can they do now legally though if they "press their case"? Isn't the estate the property of the children now or is it up to administrators to keep dealing with claims as they come in over time even if the estate was passed on?

[atticus]

If you really want the bad news, the bank may seek to make the administrators personally liable for paying the legacies without first advertising for claims using the statutory notices referred to earlier. That procedure is designed to protect administrators againt this kind of claim if made after the specified period for claims.

Here the bank appears to have been dilatory. My recommendation would be to write as I suggested earlier, and to see whether the bank takes things further. At least, by the sounds of it, the money is accessible if necessary.

[GregL]

If you really want the bad news, the bank may seek to make the administrators personally liable for paying the legacies without first advertising for claims using the statutory notices referred to earlier. That procedure is designed to protect administrators againt this kind of claim if made after the specified period for claims.

Here the bank appears to have been dilatory. My recommendation would be to write as I suggested earlier, and to see whether the bank takes things further. At least, by the sounds of it, the money is accessible if necessary.

Ok, thanks for your help.

[Sam101]

Unfortunately, as already mentioned, the debt being a personal one does mean that the bank should have made claim to the administrators as soon as they were notified of their appointment. They certainly should not have waited this long to make a claim.

However, it was the responsibility of the administrators to have sought out any debts on the estate and knowing that the bank of the business were seeking information of assets, this should have rang loud bells that the estate may have a liability. Just ignoring it was not wise.

Atticus has rightly mentioned that your brother's liability on the estate could be pressed, but the 'tack' that could be taken is one of suggesting the bank were not acting in a proper manner in not stating the debt to the administrators straight away and asking why this was not done as it could now cause considerable upset and may require questions being asked of the bank regulatory authority.
Do mention that the only beneficiaries were the children and the estate has been deposited in Trust accounts for them, asking the bank if they now wish to take this money from the children, which would not have been deposited were the administrators advised in the normal way.

The bank may ask for the amount that has been deposited for the children, which is only fair, but just perhaps, it may bring about a suggestion to mitigate the debt somewhat

This may not work at all, but it may be the only hope you have.

[GregL]

Unfortunately, as already mentioned, the debt being a personal one does mean that the bank should have made claim to the administrators as soon as they were notified of their appointment. They certainly should not have waited this long to make a claim.

However, it was the responsibility of the administrators to have sought out any debts on the estate and knowing that the bank of the business were seeking information of assets, this should have rang loud bells that the estate may have a liability. Just ignoring it was not wise.

Atticus has rightly mentioned that your brother's liability on the estate could be pressed, but the 'tack' that could be taken is one of suggesting the bank were not acting in a proper manner in not stating the debt to the administrators straight away and asking why this was not done as it could now cause considerable upset and may require questions being asked of the bank regulatory authority.
Do mention that the only beneficiaries were the children and the estate has been deposited in Trust accounts for them, asking the bank if they now wish to take this money from the children, which would not have been deposited were the administrators advised in the normal way.

The bank may ask for the amount that has been deposited for the children, which is only fair, but just perhaps, it may bring about a suggestion to mitigate the debt somewhat

This may not work at all, but it may be the only hope you have.

Thanks for the advice. Just to clarify the bank never seeked information of assets until after a year, it's when we asked them about the state of the accounts soon after the death that they required the letters of administration so we could access the account's details, and even then they didn't ask about the estate or mentioned any personal liability, we were only told the account was in overdraft. At the time we also contacted the business's accountant who suggested that since it was a limited company there should be no personal liability so that's what we assumed. Unfortunately we didn't know about the statutory notices.

[Sam101]

Please let us know when you get a reply.