# How does the OA calculate the price at which to sell to the bankrupt's spouse?



## Silvio Dante (11 Aug 2014)

I have moved this from this Key Post The family home in bankruptcy 



Bronte said:


> Legally speaking this is not at all clear.  Leave aside bankruptcy for a moment, my understanding was that even where a home was jointly owned, and they don't even have to be married, if one party makes all the payments on the mortgage, than they are entitled to the equity they have built up, and the other partner, if they have contributed zero, are entitled to nothing.  There is case law on this, it comes up occasionally.  But Ireland being Ireland, you never know until your own actual court case what way the wind blows.
> 
> I think there could well be a very solid legal argument that where a spouse makes all payments they are entitled to a higher beneficial share.



Hi Bronte,

Thanks for this very valuable post.
After a two year struggle I was forced to accept bankruptcy last year.

I indicated to the OA at the time (late 2013) my wife would hope to buy my equity in the family home.
At the time I felt there was probably about 100k equity in the house and this would have meant her finding approx 50k.
I then found out that the mortgage payments that have been made by her solely for the two years since I lost my job reduce my equity accordingly.
However your post above raises a very important question for me.

If as is the case here my wife began solely paying the mortgage in May 2012 is she alone entitled to any equity increase from there and only any spare equity up till that point is deemed mine/OA's?


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## Brendan Burgess (18 Sep 2014)

Hi Silvio

Who advised you on the bankruptcy? Did you ask them? 

Brendan


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## Silvio Dante (19 Sep 2014)

Don't faint but no one.

I had never come across this until I read a Friel Stafford document that was very strong on it.
Anyone I have spoken to subsequently simply says it is a matter that would likely be won in court but I suspect that is where it will have to be won.
Friel Stafford seem very sure any payments made exclusively by the spouse in years prior to bankruptcy would have to be set against any equity.
However my question really extends this to ask therefore is the spouse entitled to the equity build up from date he/she alone commenced paying.
Slightly nuanced variance of the issue Friel Stafford seem quite sure on.

I indicated post adjudication my spouse would buy the equity but a year ago that equity was very small so this is becoming a very significant issue for us.

If we park the mortgage payments by the spouse what is your best estimate of the discount an OA would grant a spouse in purchasing equity in family home?
I have heard 15% is norm (avoid long court process and all associated costs etc).
Do you concur?


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## Bronte (22 Sep 2014)

Silvio Dante said:


> If we park the mortgage payments by the spouse what is your best estimate of the discount an OA would grant a spouse in purchasing equity in family home?
> I have heard 15% is norm (avoid long court process and all associated costs etc).
> Do you concur?


 
You mentioned on another thread that you had not got a reply, you need to bump up a post after a few days if you are not getting answers.

Can you do the numbers for the mortgage please. 

Did you discuss with the OA the fact that your wife had a larger equity as she had made 2 years of payments on here own?

Where are you getting this 15% from, 15% of what?


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## Silvio Dante (22 Sep 2014)

Hi Bronte,

I would say there is approx €150,000 equity now in house.
I lost my job in early 2012 and have earned no income since then.
My wife (full time employed) has paid the mortgage (agreed as interest only for 5 years with bank) solely since May 2012.
She has paid 55k since then.
There seems to be a lot of support that in this instance her equity share would be 75k plus the 55k.
However the question I have now asked is whether the entire equity is hers as there is no question of any equity being in house at May 2012?


My question on a discount is simply as follows.
If the OA wants to sell the family house he faces a tough task that will involve a lot of fees (legal, auctioneering, and a lot of their own internal administrative time).
Does anyone here have any experience of what this figure might amount to?
I would say it's surely 25k minimum if a number of High Court visits are involved in gaining permission from OA to sell then all normal sale costs following.
If it is say 25k then creditors will get a min of 50k from the sale.
If the spouse offers 60k he/she is getting a 15k discount to MV but creditors fair better by 10k.

I don't mean to slight this very good site with PMs but this is a very tender subject (and because so few have been through it, it is very easy identify individuals) and no one can deny there will be some negotiating involved if my wife can find a way to buy the equity.
My experience with the OA has been very positive to date (very humane) but I don't believe it is in my interest to give chapter and verse thereby showing my wife's entire hand.
Happy to reveal as much of my experience as is sensible but don't want to compromise my wife's position in any way.


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## Bronte (22 Sep 2014)

Silvio Dante said:


> I would say there is approx €150,000 equity now in house.
> 
> My wife (full time employed) has paid the mortgage (agreed as interest only for 5 years with bank) solely since May 2012.
> She has paid 55k since then.
> ...


 
Equity is the capital portion of the mortgage, if she was paying interest only she is not getting equity as far as I understand it.


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## Silvio Dante (22 Sep 2014)

My understanding and that of my solicitor is that she has maintained the mortgage to the satisfaction of the mortgage provider and therefore any equity built up during the period she alone maintained the mortgage is hers.


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## Brendan Burgess (22 Sep 2014)

Hi Silvio 

Has  your wife made an offer to the OA?  Has she the ability to buy the house if he agrees to do a deal? Will the lender allow her to take over the mortgage in her own name? 

In the UK, the OA must make a decision on the family home within a time limit.  There is no time limit in Ireland and I gather that he often sits on the family home for a long time. He may feel that while your wife is paying the mortgage, and while your home is increasing in value, the equity is increasing, so his position is improving all the time.

You and your wife need to address this as quickly as possible. 

If he is not paying towards the mortgage, then maybe your wife should also withhold payments or at least come to an arrangement with the lender to move to interest only.

Or does the OA allow you some money towards your accommodation costs?


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## Silvio Dante (22 Sep 2014)

For example, in the case of a bankrupt individual, the Official Assignee will adopt a pragmatic position and may agree to sell the individual’s 50 per cent share of the house to the spouse. Often this is at a discount on market value (15 per cent is considered usual). If, say, bankruptcy declaration was delayed, the spouse might not be able to buy out the 50 per cent share of the house if market values increases in the meantime.

http://www.stubbsgazette.ie/news/protecting-the-family-home


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## Silvio Dante (22 Sep 2014)

Thanks Brendan,

Agree we need to confront asap but irrelevant if we cant afford.
The equity could be as high as 75k or as low as almost zero depending on the answers on mortgage payments and discounts.
So need to know how strong or weak our hand is before we can make an offer.

I feel the discount is something that can be thrashed out with the OA easily enough but fear the mortgage/equity of spouse issue may have to be tested in court.

The OA's portion of the asset is only increasing in value by virtue of my wife maintaining the mortgage and as you say why should OA benefit from something they are not paying towards?
I think a court would be very sympathetic to the spouse and not allow OA get a free ride but no slam dunk as usual once you enter an Irish Court.

Mortgage provider seem happy to allow spouse alone to maintain mortgage.


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## Brendan Burgess (22 Sep 2014)

HI Silvio

Is the OA allowing your housing costs in your reasonable living expenses? In other words are you using money which could go to your creditors to pay towards the mortgage? 

Brendan


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## Silvio Dante (22 Sep 2014)

Not a sausage Brendan.
My income is ZERO and has been for over 2 years.


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## Jim Stafford (22 Sep 2014)

Silvio

As Bronte suggested, as your wife has  being paying interest only, she has not been accumulating any "extra" percentage share of the equity. (Interest is akin to rent.)

Given the substantial equity that now appears to be available, you should consider doing a "Composition". A "composition" is a deal that is done within bankruptcy, and can allow you to exit bankruptcy faster; it is essentially a deal with your creditors.  You should ask the Official Assignee if your case would be suitable for a composition.

Jim Stafford


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## Silvio Dante (22 Sep 2014)

Thanks Jim,

I think I understand the point you have both made but still confused.

However, let me relay the legal point that was made to me.

The mortgage has been maintained over its lifetime to the satisfaction of the bank, it was an interest only mortgage for 5 years.
It was maintained jointly for almost four years and solely for the past two and a bit years by my wife.
It was renewed last year for a further 5 years.

Equity has rebuilt up in the house by virtue of overall house price increases primarily in the last two years.
If my wife had not maintained the mortgage over those two years there would now be nearly 60k of arrears on the mortgage reducing the equity on the property by exactly that amount.
So if your argument holds and the house was sold in the morning the OA would get 30k extra of equity entirely at my wife's expense.

The legal advice I have received says a court would deem any payment (interest or otherwise) would likely have to be recognised, as failure by her to pay it would have added pound for pound to the mortgage debt and reduce equity accordingly.

In fact if your argument holds she should cease all payments immediately.

I have a barrister who says if OA doesn't accept it he will take it on for no win no fee so likely it will go that route if OA takes same stance as Bronte and you.


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## Dermot (22 Sep 2014)

What is a fair estimate of the rental value of the house?


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## Silvio Dante (22 Sep 2014)

Hi Dermot,
Thanks for chipping in.
Hope I'm not being too obtuse but what is the relevance of the rental value of the house?


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## Dermot (22 Sep 2014)

I am only asking so as we have a complete picture. The OA may ask this question and it can be debated here without any consequences.  I have read your posts and I have a sympathy for your arguments and what your wife is doing.


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## Silvio Dante (22 Sep 2014)

Dermot,

Very few houses ever come up for rent in the area but I'd guess 2,700-3,000 pm.
Mortgage payments gone just above 2k.


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## Bronte (23 Sep 2014)

http://www.independent.ie/business/...y-home-if-your-spouse-goes-bust-30013034.html

trying to find case law on how equity is greater depending on the contribution to the initial deposit and mortgage during the lifetime of the loan.

*Example 1:*

Husband pays 100% of deposit and pays mortgage and wife stays at home to mind kids.

All equity would be his, but you'd have to go to court as it's not always clear cut.  Staying at home to mind children has been deemed by Irish courts to equal to zero. 

*Example 2:*


Husband pays 100% of deposit and pays mortgage and wife stays at home and works in the family business (farm, pub, shop etc)

His equity would be greater because he paid the deposit, but the wife would be entitled to a share based on the fact her work in the family business contributed to the household income, including the mortgage.  

The last caselaw I read many moons ago on this wasn't a married couple, but she had contributed by renovating the home and got her share.


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