# Personal Insolvency Act or Bank agreement



## Hunimus (7 Feb 2015)

Who can advice me?

My income:

Salary €2100 mth

Maintenance €400

Child benefit €130

Rental income €500

Total 3130



Arrears in house €80000

Mortgage outstanding €203000

House value?  Maybe €250.000 maybe €300.000

Loan to expire Nov. 2022


I Have been offered agreement from bank: Capitalisation of arrears and extension of time of 10 years.

Monthly payment : €1388 which is sustainable

PIP has suggested I go with a PIA solution. I have no other debts.

Ex partner - joint owner in house - is going bankrupt.


PIP is claiming that I would be more secure in a PIA arrangement than with just the agreement with bank when having to face the OA – Official Assignee when they are going to claim their half in the equity in the house.  It all depends on value of house I suppose. But what way would the OA treat me different being in an PIA agreement

I suppose I will be solvent with the bank agreement and insolvent for six years with the PIA agreement. So will the OA not ask of me to buy their half in the six year period? Stall the sale of house.

If house gets valude to €300.000 = €100.000 equity would mean I have to buy out the OA for €50.000. If I haven’t that kind of money I will have to sell house.

*My main question is would a PIA agreement protect me from the OA?*


Thanks for reading. Very hard to get advice in this complex case.


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## Jim Stafford (18 Feb 2015)

Given that the bank has offered you a sustainable mortgage, I do not understand how your PIP could advise you that you would qualify for a PIA.  In order to qualify for a PIA you need to be unable to meet your debts as they fall due.  However, if you accept the bank's deal, you will be able to meet your debts. (Effectively, you have to exhaust the bank's MARP process entering a PIA.)

The PIA would not protect you from the Official Assignee. The initial period of the Protective Certificate protects you for only 70 days from legal proceedings. The period of 70 days passes by very quickly.  Even if you had a 5/6 year PIA, the Official Assignee could still obtain an order for the sale of the house.

Jim Stafford


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## Hunimus (18 Feb 2015)

thank you so much for answering.
I have now been advised from a financial adviser NOT to sign agreement with bank until I know what the OA is going to do.
but I have started paying the money. 
I am after learning that the official assignee can demand half the rent if you are renting out the house. 
I wonder if that also apply to the rent-room-scheme revenue has introduced to help people in mortgage trouble. live in house myself and rent out couple of rooms to get money to help paying mortgage. If OA takes half of that I won't be able to fulfill the new mortgage agreement. 
It doesn't make sense but I suppose The OA is only interested in getting half of the equity. 
Thanks for reading 
Anette.


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## 44brendan (18 Feb 2015)

Jim would be more up to date than me on this! However, this house is in joint ownership and your ex partner is insolvent. If he goes bankrupt, this will bring his share of the positive equity in the house into the picture. You will need to buy out his share in order to get both the house and the HL transferred into your sole name. I can't see how the bank can offer you a long term agreement without taking his impending bankruptcy into consideration. have they been informed of this? Also, what has your PIP advised you on the consequences of your ex-partners bankruptcy? You don't seem to be getting good and complete advice on these issues. Also as Jim mentioned, you are solvent and should have no need of a PIP.


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## Hunimus (18 Feb 2015)

Thank you so much for answering. 
Bank do know of My ex partners bankruptcy but they got fed up waiting for it to happen. It is Revenue making him bankrupt and they have put a judgement order on the house 2 1/2 years ago.
My pip has adviced me to seek legal advice which I did yesterday. Solicitor said - if I want to hold on to house- that I would need to get an engineers report on house pointing out all bad things - like house not build to planning to try and devaluate the house as much as possible. There are a few planning issues which does make the house impossible to sell at the moment only to a cash buyer, she said. Things like boundary problem, no parking provide at front road. Also things like timber windows in whole house needs replacing, to get quote for that. Other than that i cant see what else i can do than wait for the Official Assignee.
PIP wants to know soon which direction i want to go, so i will probably chose the bank agreement.
Thanks for reading it is very complex stuff for me.


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## 44brendan (18 Feb 2015)

Hunimus said:


> PIP wants to know soon which direction i want to go, so i will probably chose the bank agreement.


In my opinion this is not good advice. If you are paying an element of capital reduction on the property you are increasing the equity in the property which 50% would be owned by your ex-partner. This would come into play in any future insolvency. Also, he may at some stage look to realize the equity in the property himself. You may be in a position to claim a higher share of the property based on your contributions, however this can prove very messy. If the house is unsalable that's another issue, but the solicitor is correct in asking you to get a current value for the property to establish both the existing value and the level of current equity both of you have in the property.


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## Hunimus (18 Feb 2015)

I know, so should i just hold on  paying the bank til i know more about what the OA is going to do?
I could definitely use the money on preparing this.
Thanks again for your answers.


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## 44brendan (18 Feb 2015)

Your main difficulty here is whether you can hang on to your current home. Yes, you can afford the extended repayments. However, it does appear likely that at some stage the 50% equity relating to your ex will be required to meet his debts. In that scenario you will be asked to buy out this equity or alternatively sell the property. This difficulty is compounded by the fact that you are uncertain about the bankruptcy. Maybe you should consider selling the property up the line and in the interim just meeting interest element of the mortgage. Your solicitor should be in a better position to give you a more focused opinion and of course you will need to take all options, both financial and personal into account in coming to a decision.


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## Jim Stafford (19 Feb 2015)

Anette

Sometimes the difficulty with receiving proper advice on this forum is that the people who respond to queries do not have all of the relevant information to properly advise.  Sometimes "Original Posters" such as yourself do not appreciate the importance of key information. *The fact the Revenue have a judgment mortgage on your partner's share of the house changes everything*.  How much is the judgment mortgage for?  If it is for more than, say €100,000, then the Official Assignee may have little interest in the house.

I do not understand why your advisor has advised you to wait and see what the OA will do.  We can predict with reasonable certainty what the OA will do.  The OA has spoken at numerous conferences/seminars and has set out the practical  steps that he takes.  He acts in an open, fair and transparent manner. His main duty is to maximise the return to creditors.  The biggest issue with the OA when it comes to family homes is that there is no time limit on him for dealing with the family home.  In the UK the Official Receiver must deal with the family home within 3 years.  In Ireland, the OA could decide not to make a move on the family home for, say, 20 years!

The difficulty you have is trying to predict what the Revenue will do with the judgment mortgage.  I would need to see your partner's sworn statement of affairs to try and predict what steps they might take.  If the Revenue were your partner's only creditors, then they could be clever and "walk away" from the judgment mortgage in a bankruptcy, and therefore "force" the OA to realise the equity and distribute it to them.

One alternative is for you to "buy" out the Revenue's judgment mortgage.  The Revenue have to act commercially, and they might "sell" their judgment mortgage to you. If your partner owes "millions" to the banks, then the Revenue would be much more interested in "selling" their judgment mortgage. If you owned the judgment mortgage, then the OA would have little interest in the house.

Jim Stafford


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## Hunimus (19 Feb 2015)

Thanks so much for your reply.
I did show my solicitor the judgement order but she didn't mention it during our meeting. 
Ex partner owes the revenue around €700,000. The bank €40000 and other companies €260,000
Just talked to him and he is willing to send his sworn statement of affairs to you if you have an address.
He is in court again for the bankruptcy 2. March 
Should I contact the revenue before that and ask them would they sell the judgement order. I don't know what kind of money that would be. I have nothing at the moment.
I do have a mother in Denmark though who has some money after sale of small house. Problem is she is dement and it is hard to make arrangements with her. 
Thanks again Jim

Anette


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## Jim Stafford (20 Feb 2015)

Anette

For a detailed review of what happens the family home in a bankruptcy you may read the following article on our website:

http://www.frielstafford.ie/personal-insolvency/what-happens-the-family-home-in-a-bankruptcy/

Based on your partner's other debts. the Revenue are unlikely to walk away from their judgment mortgage in the bankruptcy, as "their" equity would be shared with the other creditors.  Accordingly, you should approach them to "buy out" their judgment mortgage.  This process will not happen overnight, as the Revenue will probably await the outcome of the OA's review etc.  So take your time in formulating an offer to the Revenue.  Given the practical and costly difficulties with enforcing judgment mortgages, you should be able to negotiate a modest discount on their "equity".

Jim Stafford


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## Steve Thatcher (20 Feb 2015)

Jim wouldn't the judgement mortgage against the husband just sit against his equity. So if they get a judgement for 200,000 say but there is €100,000 equity in the property held 50/50. Their judgement can only sit against €50,000. The OP still has €50,000 equity in the property.
If that is right there is no equity in the property from the partner which could be used to discharge his other debts.

The point all have missed here is that there probably is no equity anyway.
OP said mortgage €200,000, arrears €80,000, house could be worth €300,000.

In that case with all outlined above the OP maybe only has to find €10,000 to buy out OA. If the house is valued at €250,000, she could pay the €5,000 he demands where there is no equity.

Then the Rev judgement sits there until she sells, but it may be worth nothing depending on what the house is valued at.

My reading is that if this is unless the house is worth more than the combined sum of both mortgage and arrears,(bearing in mind they are capitalising these to a grand total of €280,000, then there will be nothing for the Rev to secure their judgment against as all equity will be taken up, and then soley in OP's name once she buys OA's interest for €5k.

That settles it doesn't it?


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## Bronte (20 Feb 2015)

44brendan said:


> In my opinion this is not good advice. If you are paying an element of capital reduction on the property you are increasing the equity in the property which 50% would be owned by your ex-partner..


 
Do you or any of the others in this area know for sure how the 'equity' works out where one partner makes all the capital payments, surely by now there have been decisions, say in the bankruptcy cases?

If you guys don't know, than how can you advise clients.  Is this not covered somewhere in the 'new' insolvency legislation or on the Insolvency service of Ireland's website/guidelines.


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## Bronte (20 Feb 2015)

Hunimus said:


> If house gets valude to €300.000 = €100.000 equity would mean I have to buy out the OA for €50.000. If I haven’t that kind of money I will have to sell house.
> .


 
Where are you getting 100K of equity.

Value 300K
Mortgage plus arrears 283K
Equity: 17K


Does the OA know about the rent from the rooms?  Your ex surely is not privy to your financial circumstances and he surely has not been required to detail your income etc to the OA.

You have someone advising you.  Before you pay any mortgage you would need to know the following:

a) what exactly revenue can do about their judgement mortgage
b) what rights the OA has now and in the future (20 years from now) will have on equity in the house in circumstances where currently there is basically zero equity and you would pay the full mortgage. 

To my mind if you pay off everything you should be entitled to all the equity. 

Ideally, it would be better if your ex was taken off the deeds and off the mortgage. 

Can't believe how this area is such a minefield.


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## 44brendan (20 Feb 2015)

|Mortgage outstanding is 203,000. The standard is that this balance includes any payment arrears. Repayment arrears are never separated from the mortgage balance.


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## Bronte (20 Feb 2015)

44brendan said:


> |Mortgage outstanding is 203,000. The standard is that this balance includes any payment arrears. Repayment arrears are never separated from the mortgage balance.


 
That's not clear to me.


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## Hunimus (20 Feb 2015)

My new mortgage with bank agreement is €203,000. Hopefully there will be very little equity once i get the engineers the engineers report and valuation.


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## Bronte (20 Feb 2015)

Ok so that is now clear, the mortgage amount.  So there is equity of between 50K and 100K.

You seem to be hinting at something underhand about bringing down the value, be very careful, the banks are not stupid.


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## Jim Stafford (20 Feb 2015)

Anette



Jim Stafford said:


> Based on your partner's other debts. the Revenue are unlikely to walk away from their judgment mortgage in the bankruptcy, as "their" equity would be shared with the other creditors



I thought I would clarify the above statement.  If enough of the Revenue debt is Preferential (and given that the total debt appears to be €700,000,  it is likely that at least some of the debt is Preferential) then Revenue could decide to "walk away" from their judgment and allow the OA to realise the equity and distribute the net proceeds to them.

To answer Bronte's query, if you make substantial capital payments on the mortgage between now and the time the house was sold in a bankruptcy, then your share of the equity would increase.  Your share of the equity would also increase  if you paid for capital improvements e.g. extension  etc.

Jim Stafford


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## Hunimus (20 Feb 2015)

I still wonder about the revenues judgement mortgage. Will that not go away with my ex partners bankruptcy and me buying out the OA
Yes this is minefield. Really appreciate everyone's posts.
Thanks!


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## Jim Stafford (23 Feb 2015)

Provided the Revenue's claim against your ex-partner did not arise from fraud, then the bankruptcy will clear him of the Revenue debt.

The OA can only sell you his share of the house if the Revenue "walk away" from their judgment mortgage, which is a distinct possibility in this case.

Jim Stafford


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## Hunimus (25 Mar 2015)

I have now signed agreement with bank and my ex partner went bankrupt in court this week. This just dawned on me:
8 years ago my ex partner took out a loan €50.000 in our house-stupidly I signed it too The money went straight to revenue to pay a tax bill for my partners business. I am now paying back that loan as well as the rest of the mortgage. I just wondered would it have been possible to have brought that loan to my ex partners bankruptcy proceedings...  It might be too late and wishful thinking


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## Jim Stafford (25 Mar 2015)

Anette

Whilst your partner may go bankrupt, the judgment mortgage will remain on his interest in the property, as it was registered as a judgment mortgage more than 3 months before his adjudication.)

As previously advised, you should approach Revenue to "buy out" their judgment mortgage. This process will not happen overnight, as the Revenue will probably await the outcome of the OA's review etc. So take your time in formulating an offer to the Revenue. Given the practical and costly difficulties with enforcing judgment mortgages, you should be able to negotiate a modest discount on their "equity".

If Revenue do not "sell" you their judgment mortgage, then the Revenue will probably allow the OA to realise their interest in the property.  If the OA ends up going down that path, the obvious purchaser of OA's interest would be you.

In conclusion, once you "buy out" the equity, the Judgment Mortgage will be lifted. You should obtain expert legal advice in completing the transaction.

Jim Stafford


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## Hunimus (2 Jan 2018)

A few years have now passed. I have been paying the mortgage since 2014 and all is fine on that part. Airbnb and rent a room scheme has helped. My daughter and I have been living with a lot of different people in our home.
I have been out of Ireland since August 2017now living in Denmark with the daughter who is doing he leaving cert here.
My ex is living in the house but paying me rent.
I didn't approach revenue to buy out judgement order and now the OA has come back saying that the positive interest in my ex partners 50% ownership is E29569 which we have to tell him whether we will pay that or not. (thats what i have paid over the last 4 years - straight into his pocket.
I just wonder if it is possible to dispute that my ex does not own 50% anymore in that house as he hasn't paid since 2009 and he let the interest go up. We have joint ownership in the house. We now owe E178610 on the house. I think valuation is around E230000. But the OA didn't take into consideration that the house cant be sold now as there are planning issues and boundary issues, and parking needs to be constructed.
Kind regards and happy new year

Anette


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