Personal Insolvency Vs Judgement

[Yambo]

Hi,

I am a 52 year old male. Joint earning 120K.............We have a family home valued at 300K (unencumbered) but owe the bank 2.5m across a number of buy to lets.......... When the houses are all sold there will probably be a shortfall of 800k +.

We have been in negotiation with the bank for a number of years............They have now issued us with Heads of Terms with excessive valuations on the buy to lets and insisting we take a 80% mortgage on our family home. They further insist we pay the difference between the actual sales value of the buy to lets and the excessive valuation amount.

We really want to put things behind us.........The mortgage is tough but manageable....... We cannot afford to pay the shortfall on any property sales however..... We have said this to the bank repeatedly.....as has our solicitor.........

The bank's solicitor said their are going to initiate judgement proceedings against us if we don't accept the deal (on which we shall certainly default).

Should we a)Go down the personal insolvency route b) Accept the deal and face what comes c) Allow them put a judgement against us ?

Please don't say seek financial advise, we have had several advisors and no-one seems to have a helicopter view across the pro's and cons of the alternatives............. Need advice quickly if possible

 

[hubble]

1. Which bank is it?
2. Are you in default in payments?
3. Where are the properties?

My general advice is that if you are not happy with what is being proposed then do not accept the deal. There will be plenty of time to do a deal. Let the bank initiate proceedings if they like. It will be next year before anything critical happens in court and property prices will have risen by then I believe.

 

[epicaricacy]

Are your wife and you jointly and severally liable for the investment properties?

What is the total projected difference between the banks (over)valuation and current sales price on the investment properties(using daft.ie etc)?

How much approx. will the proposed mortgage cost you over the lifetime of the mortgage?

What is the duration of the proposed mortgage?

 

[TLO]

I would concur with hubble. No point in agreeing a deal that you are unable to follow through on. Personally, just me, not saying that this is the right thing to do, but one possible strategy would be to have your solicitor/PIP on standby, so that if they try to get a judgement against you, you go straight the Circuit Court for a Protective Certificate. This stops proceedings for 70 days while your PIP puts a formal proposal to them.

Also, try and stall them for a while. This is for two reasons. 1) Property prices are rising, which reduces your potential shortfall. 2) Tweaks to the insolvency legislation appear to be on the way which will remove the banks veto on insolvency deals and should improve your negotiating position.

Another possible strategy, not for everyone and a bit more nuclear is that let's say you agree to the deal, the 80% mortgage etc. Bizarrely, the existence of the mortgage may have the effect of protecting the family home in the event of you not being able to meet the terms of the deal, and go on to declare bankruptcy. As long as the mortgage payments are in line with the rental prices in the area, the Official Assignee will probably let you stay in the house, and will probably sell you his interest in due course.

Wishing you well.

 

[Yambo]

Hi,

Thanks for all your messages........ Hubble - The bank is AIB, The properties are strewn across Dublin and a number of other major cities and some dogs (Tax Releief Schemes)....... Yes we are in default i payments

epicaricacy - Myself and my wife are jointly liable, Differenece = 100-200k, Lets say - 1 salary will cover it, Duration = 15 years.

TLO - Good advice - Thank You

 

[epicaricacy]

Even though there is a gun to your head (threat of judgement), I wouldn't agree to the deal if I were in your shoes. Put simply - it's a very poor deal. It is, in effect a very expensive 15 year PIA with a very high chance of failure.

In the worst case scenario and you're left with 200k shortfall between valuation and actual selling price - you're screwed anyway.

The 200k shortfall plus mortgage on 240k at probably a high SVR over 15 years equates to a serious amount of money and,in your words, an inevitable default.

I understand your urge to 'put things behind us' - but this deal will prevent you from doing that and will probably worsen your situation. We played ball with the bank and we were not rewarded. Again, it was our intolerance of uncertainty and a desire to get on with our lives that was our Achilles heel. I spoke with a former work colleague on Friday (64 years of age) and he bitterly regrets panicking into accepting his bank's terms a few years back. He spoke of being poorly advised and making a rushed decision in the face of similar threats to what you 're relaying. His wife ended up in a psych ward due to the onerous terms of the 'deal'.
As you're an AIB customer - IMHO / Grant Thornton would surely get you a better / more realistic deal than your current advisor / solicitor. Friends of mine are currently using IMHO / Grant Thornton in their dealings with EBS and they find them really good / experienced. I know you said you're tired of advisors - but a phone call could really help you out. BTW - AIB pay Grant T / IMHO. Our friends are doing a lump sum PIA from a family member ( this of course may not be possible for you) - but some other option may be a goer.