Company liquidation and personal guarantee

My company is currently being liquidated after 35 years. There will be an outstanding AIB loan of around €100k which was secured with a personal guarantee by both my wife and I who are both directors..

I am 54. My wife is independently self employed with an income of circa €60k. I am currently looking for new employment which is proving tricky. We are currently renting a 2 bed apartment with our 2 teenage children, having sold our family home during the recession in order to save our business, which I now regret.

I have no assets other a house I part own with my mum (86 yrsl), which we jointly purchased in 2000 and she lives in, I paid the mortgage in full. I will be the sole beneficiary. It is a modest property.

Looking for advice on what my options are, as I am worried sick

We had planned to move into my mums house or sell it and buy another in retirement.

Should I contact the bank before they contact me?
Will the bank force us to sell?
Would it be worth moving into the house now?
Will the bank consider a payment plan at our age with option to pay balance when house is sold?

Appreciate all advice.

Maryoblige said:

I have no assets other a house I part own with my mum (86 yrsl), which we jointly purchased in 2000 and she lives in, I paid the mortgage in full. I will be the sole beneficiary. It is a modest property.

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When your mother dies, you will own this house fully in your own name.

It may be worth declaring bankruptcy now so only your half of the home will be an asset available in the liquidation.

Then when your mother dies, you would inherit her half of the house.

You need to get the advice of an insolvency practitioner.

Maryoblige said:

I have no assets other a house I part own with my mum (86 yrsl), which we jointly purchased in 2000 and she lives in, I paid the mortgage in full.

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Whose names are on the deeds and on the mortgage?
How much is the property worth and what is the outstanding mortgage loan amount and term?

Maryoblige said:

We had planned to move into my mums house or sell it and buy another in retirement.

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Where would your mother live if you sold it?

What has your accountant or solicitor advised on this issue?

Hello,

I'm sorry to hear about your business. I'm sure it's been a very difficult time.

Speak with an Insolvency Practitioner, there are a couple of options when it comes to dealing with these situations, which may involve opting for bankruptcy, but may also involve a negotiated settlement. Nothing to fear, let me add....

Don't contact the Bank until they contact you, which could be quite some time away. Prioritise your family needs, for now.

Best of luck with the search for a new job, it's not easy when you're in your 50s, but keep at it and you'll get something.

I assume you have contracted Springboard, they have lots of good, free, courses, that may help you get that next position.

Likewise, get any assistance that's available through Jobseekers allowance etc.

Thanks so much for the responses and kind words. It's been a very difficult few years and we are doing our very best to concentrate on our family.

There is no mortgage outstanding on my mothers house. We had a 20 year mortgage which my wife and I finished paying in 2020. My mum and I are both on the deeds. She has lived there on her own since I married my wife in 2004. The market value is €400k

My mother is quite frail so there is no option to move her but there may be an option to move in with her.

We have received very limited advice to date as we have been mostly working on the liquidation of our company.

I had always assumed it best to make contact with the bank first? Looks like the liquidation could be another 6 months.

Maryoblige said:

I had always assumed it best to make contact with the bank first?

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I don't think so. It's a very technical area and an insolvency practitioner might be able to do a deal on your behalf. For example, you agree to take out a €50k mortgage to clear the €100k and you pay that off over 20 years.

Maryoblige said:

I had always assumed it best to make contact with the bank first?

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It normally is in the case of, say, an owner occupier or even a buy to let borrower having problems meeting their mortgage repayments. But this is a completely different situation given that it's a business liquidation/insolvency situation. As others have suggested you need to get professional advice - e.g. from an insolvency practitioner - on the best way to proceed and to deal with outstanding debts that are personally guaranteed.

That would be a dream result for us, allowing us to potentially keep a roof over our heads in retirement while repaying the loan. I will contact an insolvency practitioner - should I do that now or wit until after the liquidation is complete and the bank contact us?

I have been so worried. This information hs been very usefull, thank you

Maryoblige said:

I will contact an insolvency practitioner - should I do that now or wit until after the liquidation is complete and the bank contact us?

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I would imagine that sooner rather than later would be best.

Absolutely do it now. There is nothing to be gained by waiting.

If you have other Debts it would be useful to try an insolvency arrangement now.

A Personal Gurantee in an insolvency arrangement has value of €1 when its not called in. Definitely dont go Bankrupt.

If you have no other Debts then currently you would have an elibility problem with a PIA or DSA

I can say from personal experience that AIB will allow it be paid off over a period of years.

In my case back in 2007, it was offered as an option.

They tend to be reasonable and they deal with issues like these everyday and they may even negotiate a lower amount.

But as above, an insolvency practitioner is the first step and can ease any concerns you have immediately.

Raging Bull said:

A Personal Gurantee in an insolvency arrangement has value of €1 when its not called in. Definitely dont go Bankrupt.

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That is very interesting.

Can you set out the steps for a PIA in this case, where he has what is effectively an investment property and not a home loan.

If the guarantee is worth nothing in a PIA, I presume that AIB would be very flexible on the negotiations about a settlement figure?

Brendan the default position agreed by all stakeholders subject to the Insolvency Protocol is that a PG not called in is worth €1 and voting power of €1. So even if there was credit card debt say €900, the Credit Card Creditor would outvote the PG even if the PG was a million. The Credit Card Creditor would get the bulk of any unsecured dividend

The treatment of the PG is standard . There is nothing to suggest in the Posters thread hes in arrears so he wouldnt be able to access the insolvency route, He said hes not working and assuming hes on social welfare if he had other debts of 20k say and behind he should enter one of the insolvency routes.

Maryoblige said:

Should I contact the bank before they contact me?
Will the bank force us to sell?
Would it be worth moving into the house now?
Will the bank consider a payment plan at our age with option to pay balance when house is sold?

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You are in a good position. My advice:
Do not contact the bank or negotiate. PGs are effectively worthless so good luck to them. If they get in touch simply ask for it to be written off as no ability to repay.
The bank have no charge over the house so cannot force a sale.
Unless it suits your lifestyle, no need to move into the house. If you need PDH protections at a later date (see below) it might suit then but no rush on that whatsoever.

If you want to fully protect the house, put it outside your name. E.g. Mother’s sole name. Assuming she pre-deceases you, there is no rush in putting it into your name. This has risks so the usual caveats about making sure someone else doesn’t benefit in the will.
You can also leave the house in current joint names but use a variation of your own name to make it much harder for the bank to find. E.g. Irish version of your name.
If worst case scenario the bank do get a Judgment mortgage against the house then you are still in a good position if you then live in the house as your PDH. At this point you would need to negotiate. A judgment will automatically reduce the interest rate to 2% and you would now qualify for a PIA. Paying €100k @2% over say 25 years would be €424 p/m.

Overall, try not to worry about it and I don’t think you should make any repayments unless they get JM against the house. Hold the line that the debt is totally unaffordable and try and maintain some sort of lifestyle for yourself.

GabiGeist said:

Do not contact the bank or negotiate. PGs are effectively worthless so good luck to them.

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I do not think this is a wise strategy for the OP, who part-owns a second property which they will probably in the course of time, ultimately fully own.

The OP should in their own time engage a personal insolvency practitioner to negotiate its withdrawal on favourable terms.

Just remember if you engage a PIP you will be paying the PIP and likely the bank in full. You and your wife don’t seem to have much affordability so I would avoid contacting either the Bank or a PIP unless your affordability improves (and you want to tidy things up) or unless the bank end up with a Judgement Mortgage over the property (and you want to avail of PDH protections). Otherwise I would focus affordability on yourself and your kids and see what approach the Bank take. It sounds like you already gave up your former PDH which must have been very difficult. I would put off taking on any more difficulties for yourself unless absolutely necessary. It would be years before anything would progress in the Courts and your kids might be grown up at that stage leaving you in a better position to see can you afford any payments if you decide to address this in future.