Case study Multiple properties - PIA or bankruptcy?

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Roisin

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We don't know what to do with current situation. We engage with our Bank however solution is always interest only. Future is very uncertain and we don't know if we should apply for PIA or go bankrupt or can anyone see anything we can put to banks as an option. Arrears are piling up since 2006/07.

Personal and income details
Net income partner/spouse: nature of income
Myself-public servent-€2227 pm. Permanent
Husband-Self employed- €200 average pm

number of children:2
Amount of child benefit received €260
Amount of Mortgage Interest Supplement received- None
Home loan-281,000
Lender: PTSB
Amount outstanding: €281,000
Value of home: €140,000
Interest rate: specify whether tracker or SVR or fixed rate- SVR 4.345
Monthly repayment – €1,013
Amount in arrears - Nil

Summary of discussions and agreements with the bank- have been on interest only since 2007, met with bank on a few occasions, have regular contact with them, have arrears with investment property mortgages. Interest only on everything since 2007

Investment property – 4 investment properties
Property 1
Lender: PTSB
Amount outstanding: €260,000
Value of home: €120,000
Interest rate: 1.35 tracker
Monthly repayment: €281
Amount in arrears :NIL
Monthly rent received : €600

Property 2
Lender: PTSB
Amount outstanding: €144,653
Value of home: €110,000
Interest rate: 5.64 %
Monthly repayment :€680 (int only)
Amount in arrears - Nil
Monthly rent received - €890

Property 3and 4(mortages were put together)
Lender: PTSB
Amount outstanding: €334,048
Value of home: 40,000 and 100,000
Interest rate: 6.59%
Monthly repayment :2,618
Amount in arrears-€71,170
Monthly rent received-€800

Bridging loan and other arrears lumped into another mortgage which is crossed charged with the investment houses.
€180,000
5.64% SVR
€872.42pm
Arrears-€20,000

I have no loans, credit card etc
Other loans and creditors related to husbands business include
Revenue-5,700 (pays what he can when he can)
Overdraft/business loan- €36,000 pays €50pm
Credit Card-1,300-pays €20pw
Credit Union e.g. Loan of €11,000 against shares of € €20pw

Family €2,700 pays €20pw
My husband also pays for a mobile and business vehicle.

Other savings and investments
None

How important is retaining the family home to you?
Which of the following best describes your situation?

I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it.


Any other relevant information
From my income I pay all bills, car, tax/ insurance, life cover, house insurance, house mortgage and payments on property 1and 2, clothes, food, school expenses etc. One property was empty for 3months recently. Tenant left owing over €1,000+ in unpaid rent and bills, so income can be down on these rentals at times.
My husband owns property 3and 4, a few years ago both our names went on all mortgages and all mortgages were cross charged.
We regularly engage and meet with PTSB, nothing changes other than keeping us on interest only while arrears have gone up. Last met with them last month and have been given another 6months interest only on home mortgage. Doesn’t solve situation in long run as investment properties 3and4 especially are unsustainable.
 
|negative equity|mortgage|value
Home|€140k|€281k|€140k
Property 1|€140k|€260k|€120k
Property 2|€35k|€145k|€110k
Properties 3&4|€194k|€334|€140k
Bridging|€180k|€180k
Other |€55k|€55k
Total|€745k|
You are clearly insolvent so a PIA wold be the first step.

The best outcome for you , if your lenders and unsecured creditors accept it...

net income before child benefit|€3,000
Insolvency Service's Reasonable Living Expenses|€1,700
Available to pay debts*|€1,300

*There would be even less if you have to pay for childcare

Repayments on €280k for 30 years at 4.5% = €1,400

so if you get rid of the rest of your debt, your home mortgage might be considered sustainable. In practice, I think a PIP would want to write off a good part of it.

So - ptsb writes down the mortgage on the family home.

ptsb allows the voluntary sale of the investment properties and writes off the mortgage shortfalls in full
Unsecured creditors agree to write off their debts in full

I presume that the bridging loan is with ptsb? If so they have the required majority of secured creditors and unsecured creditors. If they agree, the PIA goes ahead. If they disagree, the PIA is vetoed.

I don't think that there is any point in having a 6 year PIA. You won't be able to pay anything more. So make the PIA one year.

Talk to a PIA immediately and be first in the queue.

Making the PIA attractive to ptsb

ptsb will gain from the voluntary sale of these properties rather than having the keys thrown back and you go bankrupt.

Instead of writing the mortgage down , split the mortgage instead into a €140k active mortgage and €140k in the warehouse.

ptsb will retain any increase in value of the property.

If your husband's income increases, you will be able to increase the repayments.



Your husband needs to review his buisness
As his business makes only €800 a month and as he has built up €40,000 in creditors, it appears on the face of it, that he would be better off sitting at home watching television.

He would be better still getting a job on the minimum wage.
 
Hi OP

I think the obvious thing here is that you need to engage with PTSB for a permanent solution.(excuse the pun) I would engage a competent adviser to assist you with this. It cant be good for anyone to be limping on with this unsustainable burden.

A PIA which allows you to keep your home and provides for the sale of all the properties and the eventual write off of any debt that you cant afford is probably the best outcome for both you and the banks.

Bankruptcy is the other option and in your case its not a bad choice either especially if the bank is dragging its heels. The bank will recover a lot less in a bankruptcy situation

You cant really get on with your life in any meaningful way without getting this resolved and for this reason, I would act sooner rather than later.
 
Hi,
Thanks for replys, they are very helpful.
I made mistake on husband income it is €200pw-€800 pm.
Any extra rental income goes on bridging loan but barely makes a difference.
You advise we should talk to a PIA? Do we talk to a PIP?
Are there any around yet, i've checked websites official one I think,
no registered PIP's on it yet.

Thanks again for reply's, very much appreciated.
 
Roisin

One thing I forgot to mention in my post.

One of the requirements when applying for a PIA is that you need to have been in the MARP process for at lease six months before your application.

I note that your home loan is not in arrears so it may be that you are not actually in MARP at all. You should be aware that this may slow you up when you go to file for a PIA.

There may be a way around this if the PIP forms a view that being in the MARP process is unlikely to have made much difference to the outcome
but its hard to say if this would go unchallenged or not if the PIP were to form such a view.
 
Hi,

We have filled in SFS a few times, did speak to MABS in past and have been referred to Arrears Unit and had interest free extended for another 6 months on home loan, i thought this probably was MARP but it may not have been. I'll contact the bank.
Thanks for pointing this out I wasn't aware of the significance.
 
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