Case study self employed working to pay debts no income for three years

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BernadetteP

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Personal and income details
Net (i.e. after tax) Income self: nature of income e.g. self-employed/public servant etc Public Servant on basic rate 59,000
Income history; Public servant for 20 years approx
Net income partner/spouse: nature of income No income, self employed
Income history:Ceased to contribute to household income 3 years ago, still working 6 days a week and using any income generated by trying to pay off creditors by instalments
number of children 3 from 12 down, youngest 4
Amount of Mortgage Interest Supplement received None
Home loan
Lender: Bank of Ireland ICS
Amount outstanding:
300k
Value of home: 400 -450,000 max
Interest rate: Half fixed, half variable
Monthly repayment €1,400
Amount in arrears Nil

Summary of discussions and agreements with the banks None so far

No other property

Other loans and creditors –

Overdraft €750
Credit Card NONE
Credit Union NONE
Car loan NONE
Family NONE

Spouse owes money to bank, credit card, Revenue and business creditors.
Sole Trader
Total amt owed is considerable but unclear;€100,000 plus

Other savings and investments
10 k in credit union


How important is retaining the family home to you?
I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.


Any other relevant information

What is your preferred realistic outcome?
Know that we are lucky as I have a job and can service mortgage alone by living very frugally.

At this rate partner could be working for next 20 years for no pay and no benefit to the family so he can pay back his creditors.
He does owe them and is bad with money.
Stress has huge impact on relationships and family life. Is there a better way? What are our options, if any?


 
Can you clarify what your husbands income is. I know its being used to pay down creditors at the moment but its important to know how much he earns to give a meaningful answer.

Can we assume that the family home is in joint names and there are no other assets (cars / value ?)
 
Thank you for your response.
I will try to find out what his income is, will need to meet his accountant.

No other assets and family home in joint names.
 
Hi Bernadette

You have a house with around €150k equity, so that is around €75k each.

Your husband has debts of €100k - presumably in his own name? Can you confirm that he does not trade through a limited company? Can you confirm that you are not a guarantor or parnter in his business in any way?

The very first thing that your husband must do is to look at the profitability of his business. If he has built up liabilities but has taken no income for himself, it sounds like a terrible business. I would also be worried about the following " He is bad with money"

This suggest to me that he probably should not be in business. One of the first requirements for a successful business is to be "good with money".

Many people enjoy the status of being self-employed and they continue with a business long after it is worthwhile. He should look at ceasing to trade and try to get a salaried job where being good with money is not required.

I did this Key Post sometime ago, but it doesn't seem to get used very much. "Is my struggling business viable?" You should bring this to his attention.

When you address and sort out this problem, you can look at the overall financial position of yourselves as a couple.

Is your accountant proactive? What does he advise? Could you have a quiet word with the accountant?
 
If the debt of 100K is impacting on the families spending than a solution is to sell the home, release 100K to 150K. Pay back the 100K and rent for 1200, maybe more as now the husband's income comes into the picture.

What is the term of the mortgage remaining and your ages?

Based on the list of your husbands creditors it looks like he is in a bit of a mess. Maybe he needs help in understanding how to manage money/debt/business/income etc. It may be that it would be better all round if he gave up being in business. How long has he been at it ?
 
Thanks to all.

He is a sole trader and I have not been involved in the business in any way.I did borrow 30k to pay business debt some years ago, this was never repaid.Wouldn't do this again.

Got mortgage for 235,000 in 2010 for 21 years, so 18 years left to run.
Mortgage was based on my details only, house in both names.

I am 46 and he is 52.

I have read that key post many times.
I think he should cease to trade but he feels he has no choice to continue as creditors will all come after him if he closes his doors.
Should mention one creditor served a Civil Bill in Circuit Court earlier this year. He entered a Defence but has heard nothing further.

He enjoys his work very much and this is part of the problem.

Debts could easily be more than 100k, I don't know.

He is in business nearly 20 years, did ok when times were good but badly affected by downturn.

Had a good job and gave it up to pursue the business but that is water under the bridge.

He tried to get job back but it wasn't possible.
If he closed down now he could mind the children (all in school) and possibly engage in some income generating activity eg teaching, consultancy work

Business does cover child care expenses of €800 per month as I could not cover mortgage, bills etc and childcare from my salary.

Selling the family home is not an option I want to consider.

I will try to speak to him and his accountant to find out more.
 
You say that he is working six days per week and yet he has no income. You seem to be a little bit short on the facts. If I were you I would establish the facts and quickly.

We dont know if he is earning
1) 1000, 2000, 3000, 4000 per month and paying it all to Creditors
OR
2) earning almost nothing and paying creditors almost nothing.

If the answer is No.2, then surely he shouldn't be spending six days a week at it.

Your husband may be a perfect candidate for a DSA (Debt Settlement Arrangement) but until we know what his gross income is and how much he pays to his creditors each month, its just impossible to say.
 
Thank you Importer and I hear you.

From what I'm hearing at home it sounds like No. 2;very little is coming in and he is paying off little by little.Yes, it seems crazy to be working long hours for no return.

I am short on facts, will get to work on that and get back when I know more.

Really appreciate all replies.
 
BernadetteP said:
Got mortgage for 235,000 in 2010 for 21 years, so 18 years left to run.
Mortgage was based on my details only, house in both names.
Click to expand...

You said mortgage was 300k in original post. Big difference and if you total your assets v your liabilities you are actually not badly off at all. I'd take others advice and get out of the business, sell your property and use the equity of c.100K (?) to start over.
 
BernadetteP said:
Selling the family home is not an option I want to consider.
Click to expand...

Why? I ask because you did ask for your options from us and now you've dismissed this suggestion out of hand.

Now we have the ages and terms of mortgage I see no lee way there. Strange that you would have purchased a house in 2010 that you can barely afford when your husband has not being contributing either in that time period, although you have now clarified that he does have enough of an income to pay 10K in childcare.

Why did you pay in 30K to his business when you don't know the extent of his profits or debts?

Please clarify why the mortgage amount has change from 300K in original post and was only 235K in 2010.

If you want proper advice you have to put up correct figues.
 
There is no need for the OP to sell her home. Why on earth would she do that. She has a good salary of 59000 and virtually no other debts.
She can afford the mortgage ,She needs a house to live in and appears very happy with her existing house !!!!

As we all know the real problem here is the OPs husband, his business and his debts. We still don't have enough information about his income or monthly repayments but the OP is working on that.

If its the case that he has very little income, he needs to come to an arrangement with his creditors to repay what he can afford from his income while still retaining a reasonable amount to contribute to household expenses. This can be done either informally or through a DSA

There's a very important point here which sometimes people miss. Debts are not always the responsibility of both husband and wife. In this particular case it appears that the business debts belong to the husband alone. If that's the case the optimum remedy would be that the husband enters into a DSA (on his own) and repays a small amount each month to Creditors, but only after reasonable living expenses are retained for the family as guided by the ISI.
 
Most business debts tend to have personal guarantees, she never said he was a limited liability company. There is equity in the home, even where there is zero equity banks will slap on judgement mortgages etc. That is where I am coming from. In addition OP says that she borrowed 30K 3 years ago, which has never been repaid, is presumably a lot more now and is 'her' debt.
 
Hi Bronte,

Personal guarantees are more appropriate in business cases involving Ltd companies and I dont think we are talking about a Ltd company here. I doubt that there are any personal guarantees involved but the OP will need to clarify this

If the OPs husband enters into a DSA, then Creditors will be prohibited from obtaining judgments from that time on
 
I don't see the need to sell the family home either.

A DSA is a good idea. However, if he has €75k equity in his home, I suspect that the creditors wouldn't agree to it. If I was a creditor, I would be reluctant to accept a write-off from someone who had assets. I would proceed to a judgement and register it against the property.

Alternatively, I might accept a writedown if I got some payment from the house through a sale or a remortgage.

Brendan
 
One also has to factor in that the equity of 75K will grow each year as the mortgage gets paid. In addition I believe the debt will increase.

That ultimately will cost not just the husband but the family.
 
If the creditors don't accept the DSA, they can go right ahead and register a judgment mortgage against the family home which will expire after 12 years which means they willl end up getting a big fat nought if the family stays put. If they agree to a DSA on the other hand the Creditors might get something per month for up to six years.
 
Dr.Debt said:
, they can go right ahead and register a judgment mortgage against the family home which will expire after 12 years which means they willl end up getting a big fat nought if the family stays put. .
Click to expand...

And what about the possibility of a well charging order?
 
If he is paying the childcare of €800 per month and is paying of creditors then it is not true to say he has no income.
 
Have to agree with the other posters the information provided is contradictory.

Loan 235k, 300k, house value 400 - 450k. Did you get a good deal on the house or did you have proceeds of sale of prior house.

Is there not accounts prepared for the business. Do creditors include Revenue, bank, unsecured creditors?
 
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