Yes, you can write off a Bounce Back Loan (BBL) during a formal insolvency procedure such as a Company Voluntary Arrangement (CVA), Creditors Voluntary Liquidation (CVL) or an Administration. In these cases with a BBL being an unsecured debt, it can be written off. However, it cannot be written off whilst a company is active and trading outside of an insolvency procedure.

What if I can’t afford to repay my Bounce Back Loan?

Directors should take proactive steps if their company cannot repay its debts, including a Bounce Back Loan. They can consider:

• Speaking to the lender
  Reach out to the lender to discuss repayment difficulties. They may offer revised payment plans.
• Explore government help
  Check for any government-led repayment assistance or flexible payment options that may be available, such as the Pay As You Grow scheme (PAYG).
• Contact a licensed insolvency practitioner
  Contact us for free to discuss the company’s financial situation and explore all possible solutions.

Can I strike off a company with an outstanding Bounce Back Loan?

Directors can apply for the striking off, or dissolution of their limited company, however, it is a process intended for companies that are no longer trading and without any outstanding liabilities and will not write off a BBL or other secured debts. Creditors, including the lender of a Bounce Back Loan, have the right to object to the company being struck off.

Key points for a director to consider include:

• Criteria for dissolution
  There are set criteria for dissolution, clarified on the government website.
• Legal consequences
  Attempting to strike off a company without addressing all its debts and meeting the set criteria could lead to legal repercussions, including potential allegations of wrongful or fraudulent trading. The government also introduced new legislation to restore a dissolved company and investigate its directors’ conduct.
• Appropriate procedure for insolvent companies
  If a company cannot repay its liabilities, which may include a Bounce Back Loan, a formal insolvency process such as a Creditors’ Voluntary Liquidation (CVL) might be more appropriate.

Formal insolvency options to write off a Bounce Back Loan

A BBL is classed as an unsecured debt and can be included in an insolvency procedure. It will be paid out in liquidation after any debts that have security with creditors. Bounce back loans were 100% backed by government, so lenders will look to the government for repayment, if the debt can’t be covered by the sale of assets in liquidation.

These are the formal insolvency options if your company has an unpaid BBL, or any other outstanding debts. They can only be carried out by a licensed insolvency practitioner:

• Formal repayment arrangements
  A Company Voluntary Arrangement (CVA) is a formal repayment plan that allows companies struggling with debt to pay off all their outstanding liabilities in affordable monthly instalments. A CVA allows companies to continue trading whilst in the agreement, with any unsecured debts cleared at the end of the process.
  Find out more about Company Voluntary Arrangements
• Restructuring the company
  An administration procedure involves a licensed insolvency practitioner taking control of the company and making the necessary changes to make it profitable and viable for any potential buyer. The company can either return to profitability, be bought by a third party, or enter into a CVA, or CVL as an exit strategy.
  Find out more about Company Administration
• Closing the company
  A Creditors Voluntary Liquidation (CVL) is a formal liquidation process, which will see the company closed down. Once the process is completed, it will write off a bounce back loan with any other unsecured debts.
  Find out more about a Creditors Voluntary Liquidation
• Close your company down and start again
  It is possible to liquidate a company and continue to trade the business through a newly registered or existing company. This is commonly known as a pre-pack liquidation, and will see the initial company with debt, including a BBL, closed and liquidated, writing off its unsecured debts.
  
  These are some of the key differences when referring to a pre-pack liquidation which are agreed with the liquidator prior to a company entering CVL:
  
  • Some or all of the insolvent company’s assets can be purchased and transferred.
  • The business can continue uninterrupted.
  • Employees have the possibility of being transferred under TUPE.
  • Directors can purchase assets from the insolvent company through a CVL, whether for personal or company use.
  Find out more about Pre-pack Liquidations

Will I be held personally liable for a Bounce Back Loan?

Bounce Back Loans did not require personal guarantees and were 100% backed by the government for instances when the company could not repay. In summary, directors are generally not held personally liable for a Bounce Back Loan unless there is evidence of misuse or fraudulent use of the loan.

How we can help

If your company is struggling with debt, whether or not it includes an unpaid Bounce Back Loan, speak to a licensed insolvency practitioner, such as ourselves. Taking advice and action to tackle the debt is essential if you want to save the company and minimise any potential repercussions.

1. Speak with our initial advisers via phone or online chat. If we can help, we can arrange a free consultation with a consultant and discuss your situation.
2. During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or what alternative options are available.
3. After your consultation, if there is an appropriate route forward and the director wants to proceed, we will issue the relevant documentation for you to formally engage us.

In summary

If your company is still actively trading, there is no way to simply write off a Bounce Back Loan. To write off a BBL, the company must enter into a formal insolvency procedure, as it is an unsecured debt and will be repaid after the company’s secured and preferential creditors. Any remaining unsecured debts the company has at this point will be written off

The BBLs were 100% backed by the government so lenders will look to them for repayment, in the event of a company entering liquidation with an unpaid Bounce Back Loan.

Free Consultation

Request a free confidential telephone consultation from 9am - 8pm, 7 days a week.

Schedule a Call

Back