Bankcruptcy or PIA and retaining family home

eyesgreen_1

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Hi everyone, any advice would be much appreciated.

I agreed a voluntary sale of a buy to let property with Ulster bank (sale went through in April 2015) which left a shortfall of around €120,000. My family home is worth around €70,000 and the mortgage is €69000. My mortgage repayment is €491 per month which I am paying. I am on a very low and intermittent income and am just about getting by each month I am a single dad to two girls, (22 and 20 years old). My 22 year old daughter and her baby boy live with me. The Ulster bank have begun ringing and chasing the shortfall which I haven't a hope of paying. I have arranged a meeting with a PIP to gain advice on my options. There is a possibility myself and my daughter could temporarily move to my parents house and rent out my home for the period of a PIA which could create an offer of around €400 per month to the bank for the PIA term of 6 years (but due to her baby boy ect this wouldn't be entirely ideal but is still a possibility if it meant I could hold on to the family home). So just wondering if the bank will accept a low income offer or would I be better to go bankrupt (my only fear in bankruptcy is that I would lose the family home). Could anyone give me their thoughts on what may be the best option in my case and the likelihood of losing my PPR (family home).
Many thanks
 
Hi

Sorry about your dilemma however please retain hope. Properly done there is no reason why you should lose your family home, indeed I think it highly unlikely given the facts you set out. Go ahead meet the PIP and see what they say. It is important to continue communications with the Bank despite the difficulties so that they do not seek to portray you in an overly negative light. A good PIP should fight hard for you!

As an aside when you voluntarily agreed to sell your house was there any agreement or discussion on the shortfall? I am taking it that there was not.

Banks should be under some type of obligation or clear consumer code obligation in situations such as these. Banks should have the ability to recover as much as possible/practical for the money lent, no question. However, on the flip side, in situations like these there should be an obligation on them for the full debt to be discussed/considered at the time of negotiating a sale (be it forced or voluntary). Ridiculous and wrong for Banks to sell, they 'keep their head down' while the sale process is on-going, and when the money is in they then chase, often aggressively, the shortfall. These type of tactics should not be allowed to happen. Absolutely they should get money back, it is the piecemeal, often sneaky/aggressive manner in which they chase the shortfall that I think is wrong and puts serious pressure and stress on consumers, many of whom are frightened by the Banks and not used to dealing with them. This is wrong.
 
Hi Gerard,
Thanks very much for your kind reply. Yes it is pretty much as you say, the bank kept their head down during the sale and then re-appeared to chase the shortfall. I did try to negotiate the shortfall but with no luck. My solicitor recommended to sell anyway and to see what happened then. Also the costs of holding on to the property was strangling my ability to pay my home Morgage because of my low income so I was financially forced to sell it. I do agree that the banks are entitled to some recourse, I borrowed the money.But due to recessionary factors I simply can't pay it back. I bought the property on the cusp of the recession in 2008. I do wish the bank had been more sensibly amenable at the negotiating table. However, I will gladly accept your suggestion of hopefullness and I do hope I will manage to keep my family home. At this point it's an agreement through a PIP or Bankcruptcy. I am presently of the mindset and in agreement with an earlier post from Brendan Burgess that Bankcruptcy may be the better option than a PIP. Again my only fear is losing the family home. Thanks Gerard for your hopefull reply. It's much appreciated.
 
I can't see why Ulster Bank would bother attempting to force the sale of your PPR for the 1K equity in the house. After all, BOI are owed the 69K first and besides, solicitor & estate agent fees would be a multiple of the 1K equity.

There is little point in them forcing you into bankruptcy as you don't appear to have anything worth pursuing and your income is intermittent.

Talk to a PIP and offer a nominal amount. I wouldn't leave your home to move back with your parents. The other option would be a small lump sum from your parents (if possible) in full and final settlement.
 
You're welcome.

Re the bankruptcy route - it may well end up there but there is nothing in it for the bank to put you down that path. There is no equity in your own home (after costs, etc). I think the PIP is the way to go initially and it is better for the bank to accept a small payment for a period of time than nothing at all through bankruptcy. I cannot see a court ordering a sale of your family home and having you and your family out of the house. No way. If PIP fails then it may move to a bankruptcy situation, but I would go in that order.

Question for your solicitor regarding whether you would lose your family home in a bankruptcy, I don't know the answer. Worth reading the article in the link below also.

http://www.irishtimes.com/news/crim...family-home-bankruptcy-trustee-says-1.1616166
 
Hi Epicaricacy, Well unfortunately both my parents have passed away. My brother lives at my parents property now. (He has some mild mental health issues, hence the suitability of living there wouldn't be entirely suitable or fair for him or my daughter and grandson).

I do agree that presently the bank would have little gain in making me Bankcrupt, but however I'm assuming that in the future years if the equity continues to build in my home then the bank will have reason to force the sale of the home, so I feel there is an urgency to cement an agreement now so as to limit the stress and protect my home for my children's future.
 
Hi eyegreen_1, first of all, congratulations on getting the Buy To Let sold. This simplifies matters. The €120,000 shortfall is now unsecured debt, of the same nature as credit card or personal loan debt. The bank is extremely unlikely to force you bankrupt because if they do they have to pay for the costs of the bankruptcy. We don't know your full circumstances but from what you've said chances are that your income is less than the Reasonable Living Expenses published by the Insolvency Service of Ireland. So how could you be expected to pay anything to the BTL shortfall?

Might be best not to go bankrupt. Any interest that you have in your parents house (where your brother lives) would be claimed by the Official Assignee.

I would ask your PIP to put forward an informal arrangement (can't do DSA because income is too low). Something like €20/month for 6 years. The bank will probably reject it. Following rejection I would just ignore all communication from them until the debt falls away under statute of limitations.
 
Hi eyesgreen

All of you moving in with your brother for 6 years may turn a mild mental health issue into a more significant mental health issue. It seems like a very extreme 'solution' - born out of panic - that has little or no guarantee of succeeding. A PIA / DSA needs to be a sustainable solution. What happens if it becomes apparent that your brother's mental health begins to deteriorate (probable in my opinion) due to noise / sleep disturbance issues as a result of a baby living in the house?

I understand your need for closure - after all, I successfully petitioned for UK bankruptcy re. a mortgage shortfall. The primary reason we sought the protection of UK bankruptcy was that neither my wife nor I have much of a tolerance for uncertainty. In addition, I wanted to start my life again and didn't want the shortfall hanging over all of my future endeavours like the proverbial Sword Of Damocles. We didn't have any other property or assets that could be taken from us by the OA. Furthermore, I didn't want it to impact on any future inheritance that we may (or may not) receive from our parents. In other words UK bankruptcy and its 1 year discharge period made sense for us.

I'm not sure that placing a 6 year strain on your brother's already fragile mental health makes sense - especially to protect an asset that doesn't have any equity in it. In essence, your decison making seems to be that bequething a property to your daughters in the distant future is more important than your brother's mental health in the here and now. The simple reality is that your brother's mental health should take precedence and it's plain wrong to take a chance with his mental health.

Ulster Bank have 6 years since April to come after you. Enforced bankruptcy would not make sense for them anytime in the next 6 years. If you want to make it even more illogical for Ulster Bank to seek a bankruptcy order against you, why not restructure your mortgage with BOI and accrue some arrears?
 
Thank you TLO and Epicaricacy for taking the time to offer very thoughtful and valid points. I see the logic in both your opinions. You are absolutely right Ep, the idea of living with my brother is not realistic and is Bourne out of a sense of desperation and panic which I do need to take a step back from. Also I have of recent questioned the logic of being so fearful of losing my home as my health, my children's health, my grandsons health and my brothers health in the here and now is what is most important. Also TLO I think offering a realistic small offering through a PIP arrangement is all I can do. In terms of the 6 year statue of limitation on the debt I have read in various places that if the bank make contact with you within the 6 years and you acknowledge the debt then the 6 year period is reset from that point which could mean as Ep suggests the eternal sword of Democles hanging over my head. I'm presuming the bank may have recourse in the courts to seize assets like my car ect if I refuse to engage so it would seem offering an engagement through a PIP us the next logical step. Also TLO I was in arrears with my home Morgage with Bank of Ireland and recieved a letter from them saying my Morgage was unsustainable and they threatened repossession or self sale. I managed to catch up my arrears and have just about stayed up to date. As you say Ep closure is what I most need as dealing with two banks ringing me and threatening me has taken its toll. I do thank you both again for taking the time to offer your valuable experience and suggestions.
 
Were you in arrears as of 1st January 2015 on your PPR or in a restructured arrangement prior to this? If you have it seems as if you can appeal a PIA rejection to the courts under the recent amendment to the personal insolvency legislation designed to remove the banks' veto of PIAs - i.e. if UB reject a reasonable PIA (based on what you can afford) you can appeal it to the courts (I think)
 
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Yes I was in arrears with my PPR Morgage before January 2015. But I was of the understanding that the the new veto legislation doesnt apply to buy to let's which is what my main debt was attached to?..
 
Sorry Ep just to clarify: As of Jan 2015 I was in arrears on PPR Morgage. I cleared the arrears in March 2015.
 
I was just wondering if your PIP could come up with a PIA that included some proposition on your PPR (e.g. split mortage or slightly reduced payments to make it more affordable) in addition to a nominal monthly repayment (20 Euros) on the Ulster Bank shortfall. In other words could you use the fact that you were in arrears on your PPR on 1st Janaury 2015 (per legislation)to your advantage? A PIA can include secured (PPR) and unsecured (Ulster Bank) debt. If the creditors say no you can then appeal the PIA rejection decision in the courts and may get it overturned. I'm not a PIP, but it would be worth asking the PIP about the possibilty of such an idea.
 
Thanks Ep Thats a very interesting point. Although my Morgage on my family home may seem achievable at €491 per month, when you add in monthly bills, car bills, standard charges and my children's needs ,legal fees and the usual miscellaneous financial surprises it wears you down when your constantly just keeping your head above water. Having successfully achieved bankruptcy in England I've no doubt you found it likewise . I hadn't really considered the idea of trying to achieve reduced payments on my home Morgage, but if Im being truthful a little bit of financial room to rise above the subsistence living and breath some positive financial air would be most wellcome. I'm hoping to try and achieve a more consistent income but being partly self employed with some means tested social welfare is just about keeping me going at the moment. Your suggestion is a very good option to try and I will definetly explore it with the PIP. The change to the 2015 legislation may work to my advantage. I have arranged a meeting with him for next Monday morning so I'll keep you posted as to what he thinks. Thanks again for you time and patience, your advice has been a great help.
 
Given that you are paying your family home mortgage, you really only have one other creditor, Ulster Bank. If a debtor only has one creditor, then a PIA/DSA should be unnecessary, as you should be able to do an informal arrangement. Accordingly, I would agree with TLO above, and ask your PIP to put forward an informal scheme.

PIAs/DSAs work very well when you have multiple creditors, and you can use the votes of larger creditors to "cram down" more aggressive smaller creditors.

The changes being introduced by the 2015 legislation will not help you, as your family home is not under threat.

The key question to ask your PIP is whether he is authorised to formulate an informal scheme. Some PIPs can only formulate PIAs/DSAs, (because of the Central Bank regulations on Debt Management Advisors etc.) Informal schemes are considerably cheaper than formal schemes such as PIAs/DSAs, particularly if you are talking about a 5 year payment plan.

Jim Stafford
 
Hi Jim, thanks for your advice. On your suggestion I've looked a little into the basics of an informal agreement and it would seem that they tend to be for an open ended or certainly a longer period of time and the bank has the sway of power. (They can expect me to live below the level of means allowed under normal insolvency arrangements).

One of my main aims either way is to remove the stress of the debt hanging over me in the least amount of time as I can. But hopefully it is within the scope of an informal agreement to still remain within the 5-6 year timescale. As you say it does seem to offer a cheaper process also. I will definetly enquire these facts of my pip and also enquire if he is authorised to arrange an informal agreement and take it from there.

The main problem in all of this is that because of my low and intermittent income I will only be able to offer a nominal amount to the bank so It remains to be seen whether I will be forced down another route if the bank refuse to draw a line under the debt with an agreement. If they refuse an agreement I'll be in a stalemate position and I said in an earlier post I don't want the debt to sit with interest building so that some years down the line there is enough equity in my home to make it worthwhile for the bank to force a sale. Hopefully the pip will offer some clear guidance. Thanks for taking the time to reply Jim, it's much appreciated.
 
I also should mention I have a credit card debt of around €4700 to bank of ireland (this debt arose from using the card to service the Morgage payments on the buy to let Morgage when It got into difficulty). At present I have agreed a repayment schedule of €10 per month which is reviews every 6 months. So technically I presume I have two creditors Jim.
 
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