Insolvency law: bankruptcy and liquidation

Abstract

John Smith has been employed as a garage mechanic for about ten years with a large motor company in Exeter. He has always wanted to go into business and an opportunity presents itself when a small garage with showroom and petrol pumps becomes available on the outskirts of Exeter. John sets up business operating under the name of Merton (Motors). He has no real experience in running his own business and after about a year of trading he finds that he is quite heavily in debt. With trade particularly poor in all aspects of his business, that is in petrol sales, servicing and second-hand cars, he cannot see any prospect of settling the following outstanding debts:

• (1) £ 1 059 to the local authority for business rates

• (2) £ 4 900 to Associated Motors for spares

• (3) £25 500 to Quality Cars Ltd for three second-hand cars

• (4) £ 9 000 to United Motor Equipment Ltd for garage equipment, tools, testing gear, etc.

• (5) £15 900 to a leading petrol company for petrol

• (6) £ 360 to Allcock & Sons Ltd, a local builder, for building repairs