Case study Large Mortgage, Investment Property and Large Personal Debts
- Thread starter Alwyn
- Start date
Personal and income details
Income self: Circa 1,600.00 euro per month after TAX.
Income history: The company I had been previously working for went into liquidation. I had to claim SW payments. I then set up my own business but was barely bringing home a wage of 18,000.00 euro. I had to close the company and have been fortunate enough to get a new job.
Income partner/spouse: Patner is named on the mortgage but cannot be located. He left the property and the last I heard he was in Australia. He makes no payments towards property.
Income history: My income has been very up and down over the past few years. It is now a set monthly payment of 1,600.00 euro.
number of children: No children
Amount of Mortgage Interest Supplement received: None.
Home loan
Lender: Acc
Amount outstanding: 360,000.00 euro
Value of home: 190,000.00 euro (I am judging this by similar sales in the area)
Interest rate: 4.5% fixed
Monthly repayment: 500.00 euro (I should be repaying Euro 1,900.00 approx. monthly. The property was remortgaged so that is why the repayment figure is so high.
Amount in arrears: 9,000.00 euro
Summary of discussions and ageements: Mortgage got into difficulty in 2009. Continued to pay interest. Continued paying interest in up until late 2011. I have been paying less than interest ever since.
Investment property - Delete if not applicable
Lender: BOI
Amount outstanding: 110,000.00
Value of home: I had the property valued. Property is based in the west of Ire. with declining population of potential buyers. Valuer said realisticaly it would fetch no more than 50/60k. The latest bid I have been offered is 30k. I have not approached bank with this offer as I fell they would turn it down. Is it worth a asking them?
Interest rate: 2.1 tracker.
Monthly repayment: 205.00
Amount in arrears: 2,000.00
Monthly rent received: Nil.
Other loans and creditors - delete those which don't apply to you
Overdraft: 8,000.00
Credit Card: 30,000.00
Credit Union 30,000.00 against 4,000.00 shares
Car loan No car loan.
Family No loans from family.
Other savings and investments
None.
Any other relevant information
No
What is your preferred realistic outcome?
I hope to stay in my home and eventually have ex partners name removed from deeds and mortgage. I am unsure how I should approach both lenders with proposals.
Income self: Circa 1,600.00 euro per month after TAX.
Income history: The company I had been previously working for went into liquidation. I had to claim SW payments. I then set up my own business but was barely bringing home a wage of 18,000.00 euro. I had to close the company and have been fortunate enough to get a new job.
Income partner/spouse: Patner is named on the mortgage but cannot be located. He left the property and the last I heard he was in Australia. He makes no payments towards property.
Income history: My income has been very up and down over the past few years. It is now a set monthly payment of 1,600.00 euro.
number of children: No children
Amount of Mortgage Interest Supplement received: None.
Home loan
Lender: Acc
Amount outstanding: 360,000.00 euro
Value of home: 190,000.00 euro (I am judging this by similar sales in the area)
Interest rate: 4.5% fixed
Monthly repayment: 500.00 euro (I should be repaying Euro 1,900.00 approx. monthly. The property was remortgaged so that is why the repayment figure is so high.
Amount in arrears: 9,000.00 euro
Summary of discussions and ageements: Mortgage got into difficulty in 2009. Continued to pay interest. Continued paying interest in up until late 2011. I have been paying less than interest ever since.
Investment property - Delete if not applicable
Lender: BOI
Amount outstanding: 110,000.00
Value of home: I had the property valued. Property is based in the west of Ire. with declining population of potential buyers. Valuer said realisticaly it would fetch no more than 50/60k. The latest bid I have been offered is 30k. I have not approached bank with this offer as I fell they would turn it down. Is it worth a asking them?
Interest rate: 2.1 tracker.
Monthly repayment: 205.00
Amount in arrears: 2,000.00
Monthly rent received: Nil.
Other loans and creditors - delete those which don't apply to you
Overdraft: 8,000.00
Credit Card: 30,000.00
Credit Union 30,000.00 against 4,000.00 shares
Car loan No car loan.
Family No loans from family.
Other savings and investments
None.
Any other relevant information
No
What is your preferred realistic outcome?
I hope to stay in my home and eventually have ex partners name removed from deeds and mortgage. I am unsure how I should approach both lenders with proposals.
Brendan Burgess
Founder
- Messages
- 52,144
Hi Alwyn
This is the clearest case I have seen of "London Calling" for a while. Your Plan B should be very clear. Go to London. Become bankrupt. Come back to Ireland in January 2014 with a fresh start.
Now let's see can you keep your house?
The best you could hope for would be that ACC would accept interest payments on the value of your home which would be €700 per month.
But your mortgage would still increase by €7,000 a year (€150,[email protected]%)
If your earnings improve and if house prices rise, then you may exit negative equity after 10 or 20 years.
And then your ex returns and claims he owns half the house. He is unlikely to succeed but could wipe you out in legal costs and worry trying. (When you say that your ex is named on the mortgage, I presume that he is named on the title deeds of the house as well?)
I really cannot see any reason why you should keep the house and I can't see any way in which you can keep the house.
Write formally to ACC and tell them that you will be surrendering the house to them and in the meantime, you will pay what you can towards the interest.
I think that they will have to formally go to the court and seek repossession as your ex is not around to give consent. They can start that process now. You will give consent. And you will get their agreement to continue living in it until they have it sold. In the meantime you will pay them rent or interest.
You offer full cooperation and ask them, in return, to write off any shortfall arising from the sale. They can still pursue your ex for it if they wish.
The investment property
It's a similar process really. Is this a piece of land? If so, then you should just tell Bank of Ireland that you will sell it on their behalf if they wish. Or they can seek formal repossession in the courts. Not sure why they would bother if it's only worth €30k. Again, you should seek their agreement to write off the shortfall.
Is you ex named on this as well?
Unsecured debt
There isn't anything you can do about these unfortunately. You can tell them that you have no assets and that you are going to London to go bankrupt. Would they mind formally writing off the debts in full? They don't really gain anything by writing them off, so they probably won't agree.
You could offer to pay them 10% of the amount outstanding "when you have the money". I doubt if they will agree.
Is the Credit Card and Overdraft with Bank of Ireland or ACC by any chance? If so, they might agree to do write off the debt as part of the bigger picture.
So I think it's Plan B - London Calling
This is the clearest case I have seen of "London Calling" for a while. Your Plan B should be very clear. Go to London. Become bankrupt. Come back to Ireland in January 2014 with a fresh start.
Now let's see can you keep your house?
The best you could hope for would be that ACC would accept interest payments on the value of your home which would be €700 per month.
But your mortgage would still increase by €7,000 a year (€150,[email protected]%)
If your earnings improve and if house prices rise, then you may exit negative equity after 10 or 20 years.
And then your ex returns and claims he owns half the house. He is unlikely to succeed but could wipe you out in legal costs and worry trying. (When you say that your ex is named on the mortgage, I presume that he is named on the title deeds of the house as well?)
I really cannot see any reason why you should keep the house and I can't see any way in which you can keep the house.
Write formally to ACC and tell them that you will be surrendering the house to them and in the meantime, you will pay what you can towards the interest.
I think that they will have to formally go to the court and seek repossession as your ex is not around to give consent. They can start that process now. You will give consent. And you will get their agreement to continue living in it until they have it sold. In the meantime you will pay them rent or interest.
You offer full cooperation and ask them, in return, to write off any shortfall arising from the sale. They can still pursue your ex for it if they wish.
The investment property
It's a similar process really. Is this a piece of land? If so, then you should just tell Bank of Ireland that you will sell it on their behalf if they wish. Or they can seek formal repossession in the courts. Not sure why they would bother if it's only worth €30k. Again, you should seek their agreement to write off the shortfall.
Is you ex named on this as well?
Unsecured debt
There isn't anything you can do about these unfortunately. You can tell them that you have no assets and that you are going to London to go bankrupt. Would they mind formally writing off the debts in full? They don't really gain anything by writing them off, so they probably won't agree.
You could offer to pay them 10% of the amount outstanding "when you have the money". I doubt if they will agree.
Is the Credit Card and Overdraft with Bank of Ireland or ACC by any chance? If so, they might agree to do write off the debt as part of the bigger picture.
So I think it's Plan B - London Calling
Brendan Burgess
Founder
- Messages
- 52,144
Does the Insolvency Bill do anything for you?
I would not hang around for it to be honest. It won't be in force until the end of the year and it will take a long time to implement.
The only benefit of it is that you might be able to avoid the stigma of bankruptcy. I don't think you should worry too much about the stigma to be honest. I think we will get used to the idea of bankruptcy and it will lose its negative connotations.
The Personal Insolvency Arrangement
You might be able to keep your home under a PIA.
If 50% of your secured creditors and 50% of your unsecured creditors and 65% of your total creditors agree to a proposal, then it becomes binding on the rest.
This is what I would propose:
Write the mortgage down to €200k. If the property is sold at a later stage, ACC get any increase in value up to the amount written off by them.
Sell the investment property and give the proceeds to Bank of Ireland.
Write off all unsecured debts immediately.
ACC might agree to this. Bank of Ireland might agree to it.
If the unsecured creditors object, as they probably will, then the proposal will be rejected.
If your ex returns after some years, he might be more motivated if he knows that the mortgage has been reduced to €190,000.
So again, I would not want this uncertainty hanging over me, so handing back the house is really essential.
How about a Debt Settlement Arrangement?
The Debt Settlement Arrangement applies to people who have no secured debt. If you sell your home now, you will convert the €170,000 shortfall into an unsecured debt.
Assuming you also sell your home and your investment property, this will be the situation:
ACC|€180k|56%
BoI|€80k|25%
CC|€30k|9%
CU|€24k|7%
OD|€8k|2%
Total|€322k
You will need the agreement of 65% of your creditors to impose a solution on the rest. You will only get this comfortably if ACC and BoI agree.
So you could put a proposal to them now as follows:
"I will cooperate with you in the selling of the properties if you agree to vote for a Debt Settlement Arrangement writing off all my unsecured debts immediately as soon as the legislation comes in"
I think that this is too messy and that the others could challenge it. Under the current legislation 65% of the creditors attending the meeting must vote for it. What if ACC or BoI don't turn up at the meeting? Their majority will be gone and the deal will be rejected.
Whatever way I look at it, the simplest, cleanest, most definite is to simply hand back the keys and go to London.
I would not hang around for it to be honest. It won't be in force until the end of the year and it will take a long time to implement.
The only benefit of it is that you might be able to avoid the stigma of bankruptcy. I don't think you should worry too much about the stigma to be honest. I think we will get used to the idea of bankruptcy and it will lose its negative connotations.
The Personal Insolvency Arrangement
You might be able to keep your home under a PIA.
If 50% of your secured creditors and 50% of your unsecured creditors and 65% of your total creditors agree to a proposal, then it becomes binding on the rest.
This is what I would propose:
Write the mortgage down to €200k. If the property is sold at a later stage, ACC get any increase in value up to the amount written off by them.
Sell the investment property and give the proceeds to Bank of Ireland.
Write off all unsecured debts immediately.
ACC might agree to this. Bank of Ireland might agree to it.
If the unsecured creditors object, as they probably will, then the proposal will be rejected.
If your ex returns after some years, he might be more motivated if he knows that the mortgage has been reduced to €190,000.
So again, I would not want this uncertainty hanging over me, so handing back the house is really essential.
How about a Debt Settlement Arrangement?
The Debt Settlement Arrangement applies to people who have no secured debt. If you sell your home now, you will convert the €170,000 shortfall into an unsecured debt.
Assuming you also sell your home and your investment property, this will be the situation:
BoI|€80k|25%
CC|€30k|9%
CU|€24k|7%
OD|€8k|2%
Total|€322k
You will need the agreement of 65% of your creditors to impose a solution on the rest. You will only get this comfortably if ACC and BoI agree.
So you could put a proposal to them now as follows:
"I will cooperate with you in the selling of the properties if you agree to vote for a Debt Settlement Arrangement writing off all my unsecured debts immediately as soon as the legislation comes in"
I think that this is too messy and that the others could challenge it. Under the current legislation 65% of the creditors attending the meeting must vote for it. What if ACC or BoI don't turn up at the meeting? Their majority will be gone and the deal will be rejected.
Whatever way I look at it, the simplest, cleanest, most definite is to simply hand back the keys and go to London.
Brendan Burgess
Founder
- Messages
- 52,144
Can a family member lend you €30,000?
You will be left with around €320,000 of unsecured debts and no money to pay them. You can go bankrupt in England or you can hope that a Debt Settlement Arrangement works for you here when the legislation is introduced.
You could offer the unsecured creditors 10% of their debt to write it off immediately. They would probably all have to agree. If one objected, then you would be stuck with them so the problem would not be solved.
You will be left with around €320,000 of unsecured debts and no money to pay them. You can go bankrupt in England or you can hope that a Debt Settlement Arrangement works for you here when the legislation is introduced.
You could offer the unsecured creditors 10% of their debt to write it off immediately. They would probably all have to agree. If one objected, then you would be stuck with them so the problem would not be solved.
If the OP moves to the UK to go bankrupt her home will be sold at a massive loss to the tax payer. Why should the tax payer be lobbed with this debt if the OP is willing to pay at least the interest. Her circumstances may change. Is bankruptcy not a wrong move in situations were the mortgage holder is paying or potentially going to pay interest.
Brendan Burgess
Founder
- Messages
- 52,144
Hi Kerrigan
In the first place, the loan is with ACC, which is not state owned.
But even if it were with one of the state owned banks...
The bank has lost the money already. The taxpayer has lost it. It's gone. She is never going to be able to pay it back. The banks, whether they are state-owned or not, should recognize this. It doesn't cost them anything and it allows those affected to reengage fully with Society.
Brendan
Let's say for example, the OP's main property is sold on the open market for 200k, that leaves a shotfall of 160k whick the bank will have to suck up in losses. OP, continues to pay interest on the higher amount.
Would it not be better if the bank realised their losses now, wrote the mortgage down to 200k and made OP's repayment based on this new figure. It would not be far off what he/she is already paying as it is.
By the banks not accepting part mortgage write offs, it is only cutting off their nose to spite their face. People will go to the UK and the banks will no doubt get the 200k amount that the OP could have afforded to pay them if they had of listened to begin with.
Would it not be better if the bank realised their losses now, wrote the mortgage down to 200k and made OP's repayment based on this new figure. It would not be far off what he/she is already paying as it is.
By the banks not accepting part mortgage write offs, it is only cutting off their nose to spite their face. People will go to the UK and the banks will no doubt get the 200k amount that the OP could have afforded to pay them if they had of listened to begin with.
Brendan Burgess
Founder
- Messages
- 52,144
Hi Kerrigan
That is why my first line was to explore that
She can pay €500 per month at the moment. This could rise if the Alwyn's position improves.
I would imagine that this will be the type of split mortgage proposal which the banks will be proposing under MARS.
That is from Alwyn's point of view. From the bank's point of view, they would recover their loan.
This is a judgment call. It seems to me, from what she has said, that there is little prospect of Alwyn's position improving in the near future.
She would get hit when her ex returns and claims half the house.
Adding everything together, both she and the bank should recognise that they made a big mistake in this project and start afresh.
That is why my first line was to explore that
She can pay €500 per month at the moment. This could rise if the Alwyn's position improves.
I would imagine that this will be the type of split mortgage proposal which the banks will be proposing under MARS.
That is from Alwyn's point of view. From the bank's point of view, they would recover their loan.
This is a judgment call. It seems to me, from what she has said, that there is little prospect of Alwyn's position improving in the near future.
She would get hit when her ex returns and claims half the house.
Adding everything together, both she and the bank should recognise that they made a big mistake in this project and start afresh.
Now let's see can you keep your house?
The best you could hope for would be that ACC would accept interest payments on the value of your home which would be €700 per month.
Brendan thank you so much for spending time on this case. I will respond in my detail tomorrow.
Regarding the above. Does €700 per month cover the interest on €1900 per month or the present day value on the property?
Thanks again.
Alwyn
The best you could hope for would be that ACC would accept interest payments on the value of your home which would be €700 per month.
Brendan thank you so much for spending time on this case. I will respond in my detail tomorrow.
Regarding the above. Does €700 per month cover the interest on €1900 per month or the present day value on the property?
Thanks again.
Alwyn
Brendan Burgess
Founder
- Messages
- 52,144
Hi Alwyn
It is the interest on the current value
190,000 @ 4.5% = €8,550 per year or €712 per month
The interest on the mortgage is
366,000 @4.5% = €16,470 per year or €1,372 per month
It is the interest on the current value
190,000 @ 4.5% = €8,550 per year or €712 per month
The interest on the mortgage is
366,000 @4.5% = €16,470 per year or €1,372 per month