Charge on house as guarantor for credit union loan being called in

Although I have been on this site a long time this is the first time that I really need some help – please no lecture on how stupid they were – I know! Apologies for the length but I wanted to give all of the details and thanks for reading.

A family member bought a business which has since gone bust and he has serious debts arising – not just the mortgage but also suppliers etc. There are installment arrangements with the suppliers and the mortgage company are moving to repossess the property.

What has now emerged is that his elderly parents signed a guarantee for a very large loan from a credit union (€150k) with consent to a charge against their house. This was used to help with the purchase the business. That loan was given to an account holder who had a very low level of savings, a couple of grand at most.

There have been reduced repayments throughout with some missed but the credit union refuse to accept anything less than €800 per month for the next year while the property is being sold (€600 is offered) and refuse to shut down the account so interest is still accruing. The parents understand that they will have to sell; what we really want is some kind of an agreed delay so that they can try and sell as well as possible and to avoid the stress of court.

The parents have now received a letter saying that the credit union is seeking repossession. The credit unions reason for refusing the €600 was the borrower had found a job. However, while my family member has thankfully found a job he has installment orders already in place as well as mortgage etc. and cannot afford to pay anymore; detailed evidence of this has been given to the credit union.

The parents are on a very small income (so small that they do not pay tax) so there is very little room to increase the €600 offer. With pay cuts and my own mortgage etc. my ability to help is very limited.

The parents have been using a solicitor to engage with the credit union as they are so worried (as well as meeting them themselves) but to no avail.

What I would like is advice on a couple of aspects of this;
(1) Any advice on tactics or approaches with the credit union? As this is a business related loan MABS seemingly will not assist.
(2) Any advice of experience of the court process in repossession by a credit union?
(3) The credit union say that as they have instructed their solicitors their hands are now tied as to considering any deal. Is this true?
(4) Is there any point exploring a complaint about such a ridiculous loan been given without any consideration to whether it would be paid back, to an account holder with a minimal savings history or the ability of the guarantors to back up the guarantee?
(5) What are the actual rules (if there are any) on the criteria for making such a loan?

I am a bit confused so let me clarify the points.

The parents guaranteed a loan of €150,000.
The borrower has no prospect of repaying this loan.
The parents have agreed to sell their home to pay off the guarantee.
You want the parents to be given time to sell their home.

This seems reasonable and I am not sure why the Credit Union is not going along with it. If they feel that the borrower lied to them, then they are probably annoyed and determined not to negotiate any further.

They might also be under severe pressure from the Financial Regulator for such a large loan which is not performing.

The son should continue to pay what he can - €600 per month.

You should state your case in writing to the Credit Union board and ask for a response in writing.

If the parents are acting in good faith, the court will be very slow to grant an order for possession. Or they may grant it with a delay of 12 months on it.

The one defence the parents may have is if they signed the guarantee or the charge without legal advice. If they did this, then they could challenge the guarantee or the charge.

How much is the house worth?

4)Is there any point exploring a complaint about such a ridiculous loan been given without any consideration to whether it would be paid back, to an account holder with a minimal savings history or the ability of the guarantors to back up the guarantee?
(5) What are the actual rules (if there are any) on the criteria for making such a loan?

I don't think so really. What does your solicitor say?

You could get a second opinion from these guys. New Beginning

Thanks Brendan.

The parents were leaving it to the solicitor in the main to talk to the credit union as they were so worried - the parents had a direct meeting today with the credit union and the manager has agreed to go back to the board again with all of the information.

One of the problems seem to be (this is small town Ireland) that the credit union had heard on the grapevine that the borrower had got a promotion since he got his job - they did not check this with the borrower! He has but is on probation and will not get any pay rise (which could be substantial and would enable him to pay) for some time. In fact his pay has not changed at all and they now have proof of this (as opposed to the town chat they were relying on!).

Hopefully this will allow some kind of temporary arrangement; if not I will sit down with them and write to the credit union formally as you suggest and at least get the credit unions position formally stated. They will of course pay the €600 anyways.

They did not take legal advice and I don't think were advised to; but I suspect that is a difficult route to take.

I worked years ago in a lending company in the UK and find it extraordinary that this loan was made by a credit union, in those circumstances, but I guess that was the madness that took hold. I have not spoken to the solicitor yet on the issue of whether there is any angle to explore here.

As you can imagine it has taken me all afternoon to come down off the ceiling (I knew there was a loan but I had no idea of the size) but I feel a little better on the basis that they at least are referring it back to their board again.

I will check out the new beginnings link, thanks again

I note the parents were elderly and i doubt very much if your parents contested the validity of the Guarantee a Court would uphold it. Did your parents solicitor formally advise on the giving of the Guarantee or merely facilitated the execution of the documents.

They did not take legal advice and I don;t think were advised to; but I suspect that is a difficult route to take.

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You have to explore this angle in some detail. If the solicitor you are using now was involved at the time of the guarantee, then use a different solicitor for this.

A judge is going to be very reluctant to grant a repossession

• over a guarantee and not a direct loan
• where the family home is involved
• where the guarantors are elderly
• Where there was no legal advice
• Where the original loan may have been reckless

How did the guarantee come into being? Did they volunteer it? Did the CU suggest it?

The suppliers presumable are unsecured? Do they have a court ordered instalment order against the ex-businessman. If not he should pay the credit union for now and not pay the suppliers.

As for the legalities of the loan. If the credit union is threatening court orders for repossession they must be fairly well sure that they have all the paperwork in order. At the end of the day the couple who signed as guarantor knew what they were doing didn't they? You yourself mentioned that they 'consented to a charge' on their home. Being elderly doesn't mean they have a get out clause.

Is the home valuable? If they sell and pay back the credit union will they have enough to house themselves again? Presumable if this happens the ex-businessman can continue to pay them €600 towards the loan. I'd be looking for that in writing.

If you yourself are paying something towards this loan, and this is not clear, how will you be paid back by the ex-businessman. Are you throwing money away in the false hope of helping your parents. Have you/the parents gone through all the income and expenditure of the ex-businessman.

Thanks all!
Just to be clear - the solicitor has only become involved since the loan got into difficulty - they signed the guarantee without any advice. The credit union have a charge over the parents house. This was agreed without any legal advice. The solicitor they are using now seems to think that the guarantee will hold.

The guarantee came about in a very short time frame; the loan needed was increased at the last minute because of some shortfall in the mortgage on offer to buy the premises; the CU insisted on the charge over the house. From what I can see it was all done very quickly.

The suppliers do have court ordered instalments.

Of course Bronte being elderly does not get them off - they are not senile (although with a decision like this that might be arguable) and did sign the document. But I have to look at any possibilites that could help them. (The credit union were completely reckless as far as I am concerned - it may not be illegal but it should be!). They accept that they will have to sell - what we are trying to get is a delay for a year or two to try to sell as well as we can rather than having a forced sale along with the trauma of a court case. The house is not that valuable and they will only just have enough left to buy another house.
I am not (yet) paying anything and will only pay if it is necessary to get a temporary arrangement while they sell. In fairness, the ex borrowers finances are transparent - the parents have seen his payslips, the court orders etc. He is doing what he can

When you say they have a charge, do you mean something more than the signing of the guarantee document. As in was a 'mortgage/charge' registered against the house initially when the guarantee was taken out?

You are agreed the parents knew what they were doing. The 'new' solicitor thinks the papers are in order. People are allowed to give guarantees. To contest something like a repossession order costs a lot of money in court.

Who is paying the €600 repayment? When the court ordered the installments to creditors was the payment of 800€ to the credit union not taken into account?

I think a direct meeting at the credit union was a very good idea as is a follow up in writing of what the parents et al are offering and why. A reasonable time frame to sell should also be agreed.

If it helps you somewhat I have a relation in their 70's who 'gave' title deeds of a property to a credit union in relation to a loan to a child. No paperwork was signed as far as we know, (coz nobody is sure ), loan is on hold for more than a year and no payments being made.

Looking at things from a positive stance, the parents can sell, repay the credit union and buy a home. Also borrower can afford to make at least a payment of 600 to them, which could be looked at as an income.

Bronte - yes, there is a charge registered against the property. As far as I know the court were told about the credit union loan when the installment orders were made for the suppliers. As I have said, they accept that they are bound by the guarantee - but I want to explore every possibility - obviously an expensive legal challenge is not a runner.
You are right, it is, as I said, a little more positive than yesterday morning since the meeting with the credit union, especially as they were not in possession of the correct information. Hopefully they will take that into account and we will get some kind of delay. As recommended we will follow up directly with them in writing and hopefully will agree that delay. Thanks!

greenfield said:

As far as I know the court were told about the credit union loan

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All facts should be on the table.

Who was at the court case? Were the parents there to see for themselves. Can the instalment order be revisited if circumstances change. I think in the case of a borrower going to court and stating 'I owe unsecured suppliers x this but credit union y and credit union will take parents home' that the court could order the full 800 be paid to the credit union.

That a really good point Bronte - hadn't thought of that! Panic is a wonderful duller of logic.

credit union

Firstly this is a civil matter so it is a contract between you and the credit union.
write back to the credit union and state that you are making a proposal to resolve the matter 1.that they use the existing shares to offset against the loan so as to reduce the balance .
2.that they cease adding interest to the account as this is making the capital amount more difficult to reduce if they will not reduce the interest then ask them to charge you at the current court interest rate of 8 percent which will probably save u 2 per cent anyway
3.include in the letter that the home which the charge is on is protected under family home protection act section 4 and your parents will seek the protection of the courts in this regard
4.your parents as guarantors are not sayin they wont pay the loan
5. that you are making a reasonable offer of 600 euro and they must consider leaving you with an adequate standard of living
6 you will contact the finnacial regulator to investigate the reckless lending practices that this credit union allowed you obtain such a large loan

hope this helps

This thread is over 12 months old and OP has not posted since 18th February, 2011.

I would like to know how things went if the OP is still on AAm and willing to discuss. I find it disturbing that an elderly couple may have to sell their family home over a loan guarantee.

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