Arrears advice please.

S

Sand Man

Guest
Dear all,

Personal and income details
Income self: recently employed again after 3 yrs unemployed,earning 65k
Income history: Was self employed, business dried up and owed large five
figure sum that I will never see due to customer going bust.
Income partner/spouse: housewife
number of children: Two under 4
Home loan
Lender: AIB
Amount outstanding: 130,000
Value of home: 280,000
Interest rate: standard variable
Monthly repayment: 800
Amount in arrears : 3 mths

Interest only been in place on all three properties the last 24 months
now no further assistance being sanctioned.

Investment property X 2
Lender: AIB
Amount outstanding: 240,000 + 450,000
Value of home: 80,000 + 160,000
Interest rate: standard BTL + fixed
Monthly repayment 1798 + 2400
Amount in arrears 3 mths + 3 mths
Monthly rent received 400 + 950

Other loans and creditors -
Overdraft 10k business
Car loan 5k left at 6.75%


Other savings and investments
Nil


How important is retaining the family home to you?

I really want to keep the family home and will be in a position to begin
repayments at the end of the month with new job.


What is your preferred realistic outcome?
Keep the family home without having to declare bankruptcy.
What will the banks do next? What should I do next?
 
Was it something I said! Has anybody got any comments or advice please?
The BTL's are clearly unsustainable and the rental income falls
way short. Should we agree to sell both properties to allow the
bank register a large judgement against our family home (which they
could then try and repossess anyway) or should we seriously consider the UK for bankruptcy. We have had 5 years of worry and stress and just want to keep our modest family home. It seems just as we are making headway the bank are pulling the plug.
 
Hey Sandman

You probably know that Ireland's Personal Insolvency Bill is currently passing its way through the houses of the Oireachtas. It is due to be signed into law in the coming months. I believe that this new law will provide a solution for someone like you.

If I was acting as your Personal Insolvency Practitioner under the new law,
Most likely I would be encouraging you to follow the Personal Insolvency Arrangements (PIA) route. Basically you would be making a proposal or arrangement with your creditors to sort out your debt over a five or six year period. At the end of the period, Its very likely that some of your legacy debt would be written off

More specifically in your case, It would appear that the mortgage on your
personal home is actually quite sustainable. The 1st priority would be to protect that. I would be proposing as part of the overall PIA arrangement that the mortgage on your PPR would be put on an interest only basis for the next five years. So based on an outstanding mortgage of 130,000, you would be paying back around 430 euro per month for this

Clearly the big structural deficit is with your investment properties
and I would urge you to start discussing with your bank immediately about either surrendering these properties to the bank or getting them to agree to sell them.

Even after you sell the investment properties, there will be a negative equity figure of approximately 450,000 to deal with. On top of this you need to add the overdraft, the car loan and any arrears which will bring the total to lets say, 475000 in total
I would be inclined to propose to the bank that you would repay say 2000 euro per month against the 475000 for five years. After five years has elapsed you will have paid back 120000. which will still leave a deficit of 355000 still owing to the bank. Out of this 355000, I would then agree to have 100,000 additional mortgage placed on my PPR, which will leave 255000 that the bank will have to write off !! Your new mortgage at that stage will be 230,000 which you will start paying back interest and capital and you wont have any other debts.

When the bank are looking at your situation they will be trying to compare their loss 1) if you enter bankruptcy and 2) if you enter a PIA

If you enter bankruptcy the situation will be as follows :

Your house will be sold and the bank will realise 150000 on that
Your investment properties will be sold and they will lose 450000 on those
Writing off your overdraft, car loan and arrears they ill lose another 25000
The total loss to the bank on bankruptcy will be 325000

If you go the PIA route as set out above

The bank will only have to write off 255000 and you will get to keep your house.

Its hard to see in this example why the bank would not be willing to accept such a proposal under the PIA arrangements. It means that
they will manage to retrieve more of the debt than they would under bankruptcy and that certainly will be their main objective

Im sorry that this is so long winded and intricate but it might give you some sense of where you could get to with this. Don't take the figures too seriously. I obviously don't know enough about your situation to be sure that this is the exact solution for your particular case. It really just something for you to think about
 
Importers advice is probably the best correct advice you get.

All i would add -and its probably not "proper" procedure is that I'd immediately stop BTL payments together with letter to the bank stating that there is no way you can pay a cent more. Looking at the figures this is certainly the case- paying a high interest rate on ca. 800.000 debt should have stopped long ago -it looks like the interest alone is not much less than your nett salary. Absolutely bonkers that you have been paying this until now.

Importers proposal is one the bank may accept but could you possibly exist on it?

Assuming no increase in your salary (nor an increase in interest rates)..

You earn 65k (assuming you don't lose your job)
rental nett pre-tax income (meaning after all expences, property charges, damages, provision for empty months etc) - maybe 10k.

= 75 .ooo

after tax = 60.000 (I'm being a bit pessimistic/cautious here)

From this is the proposal is to pay banks 24.000

= 36.000 for you to pay home mortgage -presently 130.000 ,but suggestion is that it increases to 230.000. -and to pay for everything else in life for you and your family.

Is this acceptable ? If I was in your predicament I'd be off to Oz or similar tomorrow.

The only acceptable proposal is for the banks to write off the BTLs and you continue paying home mortgage. At the very least that should be your starting negotiating position. Sadly, the banks will probably not accept this even though, at the end of the day, they probably won't get a cent more. But please play hardballwith the scumbags earning over 100.000 a year after causing this mess.

(I know you hope to earn more in the future. But you must consider job security, increased interest rates, illness, an extra kid, etc. You haven't got a bean for contingencies)

P.S. Open a small bank account somewhere now, either in your name ,the wife's and/or both.Put in a few euros . Open that account -and if possible credit cards -before AIB gets nasty. In other words, build up a tiny positive credit rating with another bank whether in Ireland or N.Ireland.
 
Thank you both.

I appreciate you taking the time to give me some advice.
SM.
 
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