Case study Mortgage arrears and large debts

M

Matthew Moore

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286
Income details
Net €425/month
Income history: Self employed 2002-2011, couple of jobs since then but currently unemployed since May 2013
Net Spouse: €1438
Income history: Full time employment

Personal circumstances so we can calculate your reasonable living expenses
31yo, married with no children. Reasonable living expenses for 2 adults with no vehicle are €1438 according to ISI, we are currently living on a bit less.



Home loan
Lender: BOI
Amount outstanding: €300k
Value of home: €80k
Interest rate: Tracker
Monthly repayment: €1050 due (paying €500)
Amount in arrears: €20k

In MARP since Nov' 2011. Bank wanted voluntary sale or surrender after 2 month in arrears. Appealed this and being negotiating since then. Current situation is reduced payments of €500/month, due to expire in November.




Other loans and creditors -
Credit Card - €1,800
Business debts and unsecured loans etc- €75,000
Revenue debts- €150,000

Other savings and investments

None


How important is retaining the family home to you?

As there is no equity in the house we would like to stay if there is a way possible. I have made over €100k in repayments since we bought the house.


Any other relevant information

What is your preferred realistic outcome?
I really don't know. I've been waiting for the ISI to get up and running in the hope there would be something in it to help ease the pressure from us. I've contacted a PIP and after an initial consultation he explained that my income is too low so the return for my creditors would be too little to make a PIA viable. The PIP recommended bankruptcy, this is my final option. It would be an Irish bankruptcy as for personal reasons going to the UK is not an option.
 
Hi, apologies for the long first post. I'm at my wits end. I thought we would be suitable for a PIA but I suppose there has to be a realistic return for the creditors.

I forgot to add that my wife is not attached to my mortgage or debts, they are all solely in my name.

Any help, suggestions or questions would be gladly welcome.
 
I would agree with your PIP unless you are able to come up with a lump sum that you can use to do a short arrangement with your creditors
 
I wouldn't have any access to a lump sum unfortunately. Even the €500 for the protective certificate would of been difficult to drum up, I would've had to miss a mortgage repayment.
 
With an income for €428 per month, your mortgage is totally unsustainable as you have demonstrated by running up €20k arrears.

A PIA is not suitable because you could not support a reduced mortgage.

My view is that you should agree to sell the house in an orderly manner.

You will then be left with unsecured debt

Bank of Ireland: €220k
Revenue €150k
Business loans €75k

You should then seek a very short - maybe one year - Debt Settlement Arrangement. In this way, you will be debt free after one year.

You could ask Bank of Ireland for their agreement in advance to support the DSA. They might agree to this if you agree to sell the house in an orderly manner. If they do, you won't need to get much more of your creditors to agree to achieve the 65%(?) needed to approve it.

If you don't get the 65%, then go bankrupt.

Brendan
 
I agree broadly with Brendan's recommendation. Based on arrears/low income etc, there is no rationale for retaining your PDH. This is now a burden rather than an asset and needs to go. All options will lead to the sale of the PDH. You are both young enough to start again!
 
Brendan Burgess said:
With an income for €428 per month, your mortgage is totally unsustainable as you have demonstrated by running up €20k arrears.

A PIA is not suitable because you could not support a reduced mortgage.

My view is that you should agree to sell the house in an orderly manner.

You will then be left with unsecured debt

Bank of Ireland: €220k
Revenue €150k
Business loans €75k

You should then seek a very short - maybe one year - Debt Settlement Arrangement. In this way, you will be debt free after one year.

You could ask Bank of Ireland for their agreement in advance to support the DSA. They might agree to this if you agree to sell the house in an orderly manner. If they do, you won't need to get much more of your creditors to agree to achieve the 65%(?) needed to approve it.

If you don't get the 65%, then go bankrupt.

Brendan
Click to expand...

My understanding was that I was inelgible for a DSA as I'm living below the ISI's reasonable living standards and therefore there is nothing to offer creditors or pay the PIP's fee.

Have I got this right?

I've been to a PIP and that was the advice he gave.
 
HI Pat

I have heard that said before, but I don't know the source of it.

The maximum period for a DSA is 5 years. But there is nothing to say that it can't be for one week.

If you are completely insolvent, there is no advantage to anyone in the administrative cost and hassle of bankruptcy.
 
Brendan,
I suppose it's worth revisiting before I hand in the bankruptcy papers to the examiners office.
I think the issue with the PIP was that there wasn't even enough to cover his fee, which is understandable. Getting the money up for the protective cert would be a gamble considering that Revenue would have to opt in and the bank would have to agree to the shortfall from the house being dealt with in a DSA. Then the creditors meeting.
I tried to sell the house last year as part of a voluntary sale on behalf of the bank, not a nice process having people poking around your house every weekend and running it down. I did not want viewings without being present myself. In the end the bank refused the offers that came in and I was back to square 1.
 
the bank would have to agree to the shortfall from the house being dealt with in a DSA.
Click to expand...

If you can sell it yourself, the shortfall would be an unsecured debt.

The lender may have changed their tune since last year. Try again.

Brendan
 
Brendan Burgess said:
If you are completely insolvent, there is no advantage to anyone in the administrative cost and hassle of bankruptcy.
Click to expand...

I'd be amazed if revenue would play ball on this. I wonder do they have a policy on this yet.

In any case an arrangment would only work if Pat could get everyone to agree in writing that they would not puruse him in the future. By going bankrupt he doesn't have to worry about that, and more imporantly he doesn't have to continue with the stess of trying to deal with all the debtors.
 
Bronte said:
I wonder do they have a policy on this yet.
Click to expand...

Good point. They were supposed to be publishing guidelines for PIps about what they would and would not agree to.

In any case an arrangment would only work if Pat could get everyone to agree in writing that they would not puruse him in the future.
Click to expand...

Eh, no. If 65%(?) of the unsecured creditors agree to a DSA , it is binding on the others. In this case as BoI has €220k, that is well over half the battle won.

If there were only two or three creditors, they might agree to a voluntary scheme outside a DSA, but I think it unlikely in this case.

Brendan
 
Brendan Burgess said:
Eh, no. If 65%(?) of the unsecured creditors agree to a DSA , it is binding on the others. In this case as BoI has €220k, that is well over half the battle won.
Click to expand...

Ok so he only has to persuade BofI and then revenue will also be off his back. Then it's worthwhile pursuing with the bank, maybe they will play ball. I wonder do they too have a policy on this.
 
Revenue supposedly have a dedicated email for insolvency. I think I read that you can email and ask for the debts to be included and if you havent heard anything in 21 days you can presume that they have no objections.

It still doesn't address how a PIP would be paid if I have no assests and no excess income?
 
pat2.


If pat2 gets Boi on board as per Brendan , Dsa is the way to go.
I would hope BOI would see this Dsa option as worth more to them than Bankruptcy.

To pay pip ,(if Dsa is non runner.)
,Can Pat2 withhold the 500 month on mortgage ,use it to pay the PIP ,as he is going Bankrupt in any event ? .
 
Gerry Canning said:
pat2.


If pat2 gets Boi on board as per Brendan , Dsa is the way to go.
I would hope BOI would see this Dsa option as worth more to them than Bankruptcy.

To pay pip ,(if Dsa is non runner.)
,Can Pat2 withhold the 500 month on mortgage ,use it to pay the PIP ,as he is going Bankrupt in any event ? .
Click to expand...

Thanks for the advice lads.

There does seem to be alot of "if's" involved though and I don't want to put my wife through anymore turmoil. We have, as mentioned already tried the voluntary sale route and the bank refused the offers.
It appears bankruptcy is the cleanest cut. I'm sure a Pip would have fee's greater than €500. I've already been told by one that Im unsuitable for a DSA/PIA because of my income. This is unlikey to improve in the next 5 years as Im pursuing further education.
 
Hi Pat

Under the circumstances, I think that you are justified in holding back the mortgage payment to build up a fee for a PIP. That alone might motivate the Bank to do a deal.

If one PIP declined, get a second opinion.

Brendan
 
Hi Brendan,
Why do you think a DSA would be much better than bankruptcy and why would they agree to a 1 year settlement?
On the case studies I read they all seem to be 5 years and PIP's fee's run into the thousands.

I'll get a second opinion from a PIP on whether he'd take me on.
 
Everyone talks about a PIA being for 6 years and a DSA for 5 years. But these are the maximums. There is an ISI case study for a PIA which lasts 6 months. The subject had a small plot of land for sale, and the reasoning was that once this was sold, there was no further money for the creditors, so there was no point in having the PIA going on any further.

Why would anyone go for a DSA for 5 years when they can have bankruptcy in 3?

From your description of your situation, you can't pay anything in bankruptcy or in a DSA. The bankruptcy period is 3 years - you can't amend it. You can go for a DSA of any period.

If you have been messing Bank of Ireland around, they might veto the DSA. In which case, you must go for bankruptcy. But in any event, it is a requirement of going bankrupt that you attempt a DSA or PIA.

Brendan
 
I read that one of the requirements for a DSA is that you must be able to pay the PIPs fee. I clearly cant pay this as my only income is about €450/month. I have been relying on my wife to support me and pay as much as the mortgage as possible from her modest wage. I can't gaurantee that support will continue. My wife has no involvement in my debts or mortgage agreement. I therefore will not be prevented from seeking bankrupcty.
While the prospect of a 1 year DSA is appealing, even a 5 year would be better than a 3 year bankruptcy in my opinion. Even if I found a PIP willing to make a proposal he would need an up front fee and €500 for protective certificate. I just don't have it. We are facing certain homelessness in the very near future and need to prepare financially for that.
 
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