Bank coming after my late father's estate (He guaranteed an overdraft with me €10k)

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djk1000

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Hi, apologies for the long post but I'd appreciate some advice,

I used to work for myself, but I lost the business about a year and a half ago. I ended up with quite a bit of debt with the bank. My dad guaranteed an overdraft with me (€10k) he was a non working director of the company, we did this about 6 years ago. My dad passed away about 4 years ago and at that time the bank were informed and sent a copy of the death certificate.

Since the business finishing up, I've done all I can to sort my life out, I did some courses and got a new job, it doesn't pay much now (just over minimum wage), but it has prospects for the future.

I had been getting some letters from the bank and I did get in touch to say that there wasn't anything I could do to meet the debt at that time, but I was looking for work and I'd keep them in the loop. after a while, I got a legal letter and there was also a legal letter to my deceased father, these threatened legal action.

The first thing I did when I got the job was to write to the bank with a statement of my income and expenses and I made an offer based on my ability to repay, with the provision that as my pay increased, all of the increase would go towards the debt.

They solicitors wrote back to me yesterday saying that "their clients" wouldn't accept my offer and they were instructed to continue to proceedings. I'll quote you the last paragraph of the letter,

"Alternatively, perhaps you could by return let us know what proposals you can make with regard to the discharge of this loan from your fathers estate?" then they ask for contact details for my fathers solicitor.

This has me worried, he died 4 years ago, his assets were the family home which is jointly owned with my mother, some savings in joint accounts with my mother and a pension which was heavily based in property, isn't worth much and doesn't mature for several years, this is now in my mothers name.

The cupboard is bare, I honestly offered to repay as much as I can, the thought of them going after assets that are now my mothers is really scaring me.
 
Something is not right ... They are coming after you fathers estate, but your business finished just a year and half ago and your told them at the time about his death. Why didn't they call the debt in then... because your business was running well and they wanted to do business with you !!! However now things have gone bad they want a chunk of it.
I would suggest you seek your own legal advise. May citizens advise can help.
 
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Get good legal advise

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look at 6a to see does it make any sense, ie two years from date of death in relation to guarantees

it does look like they can enforce it.

But logically once informed by death cert, overdraft should have being called in immediately or new guarantee sought.
 
I don't see the problem here.

Someone guarantees someone else's debt.

The debtor doesn't pay the debt.

So the guarantor must pay the debt.

The guarantee is a liability of the estate, and the executor should have taken this into account.

The bank doesn't call on guarantees immediately. It gives the debtor time to try to sort them out. If the debtor can't sort them out, then they call on their guarantee.

If the bank had put the boot in as soon as the guarantor died, people would complain about the bank chasing a newly bereaved woman.

Brendan
 
I'm going to throw this out.. the legal eagles can comment -

From what you say the only property in your father's estate that is not in joint names is a future pension fund that has not matured yet.

I think, and I only think, that the jointly held property does not form part of your father's estate. In other words it cannot be distributed by will or intestacy, but passes automatically to the other joint holder, your mother. I do not think the bank can take the debt from any of those assets.

They may be able to take the guaranteed debt from the pension, but that would depend on the terms and conditions. The pension may also be outside the estate, if it is to be paid by the trustees of the pension fund to your mother, again the will or intestacy would not cover that.

Obviously you should speak to the solicitor acting in your father's estate, s/he may very well be able to reassure you that the bank cannot sequester any jointly held or trustee assets of the estate.

I am open to correction on this, but it is something worth checking out.

MHC mention the above, ie creditors cannot access joint property
 
get the money from somewhere by the time solicitors get going on this that 10k will be 20k in no time.
 
The guarantee lapsed once your father passed away. The bank could have ruled the account to crystallise the debt at the time and called on the guarantee - it didn't. Called the rule in claytons case - once the bank allowed you to lodge and draw on the account this created new debt which the guarantee could not have applied to as the guarantor was deceased.
 
djk1000.
A question:
If your father died 4 years ago, how is it possible to have a pension that "doesn't mature for several years"?
On death, the value of the pension fund is generally paid out to the estate. If there is an attaching Spouses Pension, then this is payable immediately.
Do I dont understand how the pension fund is still in existence if your father is dead. It has to be paid out.
 
kaplan said:
The guarantee lapsed once your father passed away. The bank could have ruled the account to crystallise the debt at the time and called on the guarantee - it didn't. Called the rule in claytons case - once the bank allowed you to lodge and draw on the account this created new debt which the guarantee could not have applied to as the guarantor was deceased.
Click to expand...

Hi Kaplan

This is very interesting. Could you explain the rule in general.

Does a guarantee expire with the death of the guarantor or does it attach to their estate?
 
Brendan
Claytons rule: I guarantee your 10k overdraft which is 10k overdrawn. I want out and tell the bank. The bank allows you to lodge 7.5k and pays cheques valued at 7.5k. What's the value of the guarantee to the bank 10k? or 2.5K? It's 2.5k. I am not responsible for your new debt of 7.5k. To stop claytons rule the bank should stop the account. Same thing happens if I die - which is why banks treat the death of a guarantor of an overdraft as a default event. Does it apply here? I think so unless there is wording to the contrary - the poster says the bank as on notice of the death of a guarantor.
Generally with loans the guarantee doesn't expire and the estate can be called on to make good a guarantee. in which case the executor should take this into account. If at least to crystallise the value outstanding.
 
the rule in claytons case from my memory is that lodgments made to the account subsequent to the death of the guarantor are deemed to reduce the amount which the estate is liable for.
 
Thanks Kaplan

The guarantee lapsed once your father passed away.
Click to expand...

Generally with loans the guarantee doesn't expire and the estate can be called on to make good a guarantee.
Click to expand...

This was the bit which confused me. In general a guarantee does not expire which is what I had assumed.
 
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