What will my mortgage provider do if I go bankrupt?

M

machi

Registered User
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Hello, I am new here and wondering if anyone can help with the following;
My home is in negative equity, current market value 100K
I have a mortgage of 270k
my repayment is at present €1100pm
my weekly income is €500 net
I am finding it difficult as is to service the mortgage and due to other debts also am considering bankruptcy
I believe that the bankruptcy living expenses are about €250 per week for personal expenses plus another €250 or so for accommodation
What is the likelihood of my mortgage provider continuing to collect €250 accommodation allowance from me once I go bankrupt or would it be more likely for them to seek repossession of the property
i am concerned that they might be likely to still seek this payment per week and that at the end of the bankruptcy term i will still be left with a house in huge negative equity
Any advice welcome
 
When you go bankrupt, your home and your mortgage vests in the Official Assignee. You no longer owe the money.

The OA will presumably hand the house back to the lender and you will be rid of it and the mortgage.

You should notify the lender that it is your intention to go bankrupt and would they like a voluntary sale of it in the meantime? They might even do a deal with you about writing off the shortfall after the sale and so you may not need to go bankrupt.

Brendan
 
Hi Brendan,
I am interested in the same subject as very similar situation.
I have heard the banks are not writing off the shortfall.
can the Bank choose to stay out of the Bankruptcy process and make you stay in your house?
 
Hi Brendan,

Like the posters above, I am in a similar situation too. I am single, and have the ability to move to the UK. If the banks are writing off the shortfall (in my case it would probably be app 150k), my best option may be to stay here. However, things appear to be much more straightforward in the UK. I have no desire to keep the property and I have no other assets. Is going to the UK to get this sorted out the right option? Thanks for your help.
 
Why do you need to go to the UK? The Irish option is 3 years and it will cost less than UK without the costs, hassle and stress of a UK bankruptcy.
 
Hi Bronte,
I'm aware of the costs of a UK bankruptcy, but doesn't it end up costing a lot to stay here and do it too? Plus, aren't you discharged from bankruptcy after a year in the UK? If the hassle and stress involves relocating for a year, I'm ok with that. I'm grateful for your feedback, but can you elaborate? Thanks/
 
Magnum! The bank can not opt out of the Bankruptcy. However it can insist on the PDH being sold. Any shortfall will come under the heading of unsecured creditors and will expire after 3 years (potential that you may have to meet a repayment arrangement for up to 5 years).
 
I was told by a solicitor that the bank will not write off the shortfall after a sale and will continue to chase you for it .
 
They can't chase you if you are bankrupt! Debt just falls in to the pile and will be fully discharged in 3 years.
 
Yes thats true Brendan, sorry if i was unclear, if you dont go bankrupt i was told they will chase you for the shortfall.
 
Yes they will. However, sucess depends on your ability to pay. Once shortfall becomes an unsecured debt you can avail of alternative insolvency processes, if bankruptcy is not appropriate!
 
44brendan said:
They can't chase you if you are bankrupt! Debt just falls in to the pile and will be fully discharged in 3 years.
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True, but can you guarantee that if you have any spare cash the creditors will not seek an income payments order for a further five years. This is the sting in the tail that makes this solution so pernicious.

Steve Thatcher
www.stevethatcher.ie
 
In Ireland as in UK the debts pertaining to land must be actually secured by the land. Would not apply to an unsecured loan given to buy a house or site! I.e. this relates to statute of limitations only and not to insolvency!
Also under Irish legislation if a PIA is availed of any repayment arrangement will be for a maximum of 6 (exceptionally 7) years. After that period the balance is W/O and cannot be pursued again.
 
Thanks all, great feedback!
So as far as I can understand, if I go Bankrupt then I will loose the house as the bank HAS to get involved and they will not do a write down. Correct?
They will then try to get as much back as they can during the 3 year bankruptcy and possibly 5 years after that, yes?
If I am then renting and have no expenditure allowance left, then presumably they cannot get anything?
Is this all correct?
 
magnum said:
Thanks all, great feedback!
So as far as I can understand, if I go Bankrupt then I will loose the house as the bank HAS to get involved and they will not do a write down. Correct?
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If you can meet full payments, have enough left for reasonable living expenses and the bank, OA and yourself agree it may be possible for the mortgage to remain outside the bankruptcy if it is classed as a family home. [broken link removed]

magnum said:
They will then try to get as much back as they can during the 3 year bankruptcy and possibly 5 years after that, yes?
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The OA has recommended entering into an income payment arrangement with him as early as possible in the process. The maximum lenght of this would be 5 years from commencement so you could be dischaged from bankruptcy in 3 years and the income order could finish 2 years later.

magnum said:
If I am then renting and have no expenditure allowance left, then presumably they cannot get anything?
Click to expand...
Yes, they can't ask you to live on anything below the reasonable living expenses and accommodation allowance for your circumstances.
 
Bronte said:
Why do you need to go to the UK? The Irish option is 3 years and it will cost less than UK without the costs, hassle and stress of a UK bankruptcy.
Click to expand...

Steve Thatcher said:
Bronte, how do you quantify these costs?

Steve Thatcher
Click to expand...

Steve, I also would of been under the impression that the UK option would now be a more expensive option based on the anecdotal evidence.
Have any of your clients given any indication of the overall cost?

I think if you are coming at the bankruptcy with a warchest of more than £10,000+ to cover relocation costs, loss of earning, professional advice etc then the UK is a great option. The 1 year term is certainly very attractive. That of course excludes the emotional cost of going through such a challenging experience without family and friends.

If you are truly broke it seems that the Irish process is a good option. It should cost less than €1000 and there is the €250+vat that mortgage lenders will pay for you to meet a accountant for financial advice. more details here http://www.keepingyourhome.ie/mortgage_arrears_information_and_advice_service/index.html
 
pat2 said:
Steve, I also would of been under the impression that the UK option would now be a more expensive option based on the anecdotal evidence.
Have any of your clients given any indication of the overall cost?

I think if you are coming at the bankruptcy with a warchest of more than £10,000+ to cover relocation costs, loss of earning, professional advice etc then the UK is a great option. The 1 year term is certainly very attractive. That of course excludes the emotional cost of going through such a challenging experience without family and friends.

If you are truly broke it seems that the Irish process is a good option. It should cost less than €1000 and there is the €250+vat that mortgage lenders will pay for you to meet a accountant for financial advice. more details here http://www.keepingyourhome.ie/mortgage_arrears_information_and_advice_service/index.html
Click to expand...

You have a valid point, but it may not just be the cost of getting the bankruptcy order I am referring to. You are having to live on allowances for three years which are very tough. All extra money goes to your creditors. Then there is the potential 5 year income payments agreement. For some people this all needs to be factored in.

I accept that this is not all clear, but costs are sometimes more than the initial fee

Steve Thatcher
 
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