# unable to pay back personal loans used in now-liquidated business



## holly8 (9 Oct 2010)

Scenario - 
husband had his own company which is now liquidated.  He has no income at all & not entitled to social welfare based on wife salary, which is barely above the min cut off amount.

Husband owes the bank €6k on an overdraft from company bank current account (but signed for under personal guarantee, not a business one); owes the CC another 6k (again, a personal debt) and also has a bank loan for €15k (again, signed for under personal guarantee).  This €15k loan was used to invest in the business which can no longer pay back on the loan.  Nor can the husband.

The company is liquidated, husband has zero income (and no immediate prospects on one either).

Wife has met with the bank on husband behalf (husband has head in sand!), the bank is "urging" wife to pay off debts on behalf of husband so to avoid bad credit rating, debt collection process, etc.

What advice can I give them on how to proceed with this? worried!


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## Brendan Burgess (9 Oct 2010)

Do they have a mortgage? In whose name is the home and mortgage?  This could complicate matters. 

Assuming that they are renting, the wife should not take responsibility for the husband's debts and is under no obligation to do so. 

His total debts are €27k. Are they all owed to the same bank? 

The husband's credit rating is shot already anyway, so there isn't anything which the wife can do. In fact, it is probably better that his credit rating is gone,so that he can't borrow any more money. 

The husband should set out his financial position and explain that he cannot make any repayments as he has no income. He can consent to judgements against himself for his debts. 

The banks cannot get blood out of a stone. They make seek an instalment order from the Court, but it won't be much use to them. 

The only role the wife has would be to agree to repay part of his debts in return for a huge debt settlement. In other words, if they agree to write off €25,000, she will agree to taking on a personal loan for €2,000 over 5 years.  The advantage of this is that when the husband gets a job, he won't be bogged down by debt. 

Brendan


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## Peter54 (9 Oct 2010)

OP, I have heard umpteen cases similar to the one you have explained but for loans exceeding more than 50k.  Also another case were three different people gave personal guarantees on an 80k loan and the business is no longer.  In these cases the banks have yet to go after guarantees, as Brendan mentioned they cannot get blood out of a stone.


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## holly8 (9 Oct 2010)

Hey - thanks for replies.

More info then - 

Family home is halfway through a 20 yr mortgage (through Financial Institution A). House & mortgage in both husband & wife name.

Husband has no other assets at all - other than small shareholding in company for which he borrowed the €15k - no income from this company though. No income from any other source. Company is barely afloat.

Wife does have another property, bought before they got married (mortgaged through Financial Institution B). Also some savings on deposit with same.

All husbands loans/debts are through Financial Institution B.

Wife monthly salary income = family monthly outgoings, 2 school-going children (no childcare costs though as Husband at home) - nothing left over here. 

1 child with special needs so attemping to make financial provision for this child & having to pay privately (handsomely) for services that should be provided by HSE but are not - another story for another day.

Wife so tempted to pay off CC due to high interest rates & the worry.

Wife met with bank - offer from bank to re-package all loans into one at a bsiness rate of 4.x% interest. At ridiculous monthly payments of well over €450/month over 5 yrs or the like. That she would have to pay.

How would one proceed with the option of a huge debt re-settlement? negotiate with banks oneself or through a 3rd party?

BTW the CC card debt is a personal one, not from the company but one he stupidly used for day-to-day expenses as his company started to fail


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## Brendan Burgess (9 Oct 2010)

Hi Holly

How much is the house worth? 

How much is outstanding on the mortgage? 

Is the shareholding in a separate company from the one which the husband owned and which is now in liquidation?


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## holly8 (9 Oct 2010)

House in probably worth c. €300K - though who can tell these days (2 much nicer houses on the same "block" for sale for over 18months now & no budging them)

About €180k left on mortgage - will have to double check that amount.  Its on a tracker (TG) and never missed a payment.

Yes, shareholding is in a company seperate to that which went into liquidation.   Though this shareholding almost worthless, I would magine, & currently going through a legal process.


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## Brendan Burgess (9 Oct 2010)

OK, that changes the situation completely.

There is €120k equity in the house. Husband's share is €60k. 

In fairness, the husband has assets and so he is morally and legally obliged to pay his debts.

The bank will get a judgement and register it as a judgement mortgage against the house. This means that if the house is sold, the original mortgage will be paid off first and then the judgement mortgage will have to be paid. 

There are a few options. 

1) Sell the family home and use the proceeds to pay off his debts.  Move into the other property. 
2) As the wife has cash, she should consider using this to pay off his loans. 

Wife should offer the bank a settlement figure for her agreeing to take over the loans. This gives the bank cash now and saves them the hassle of legal processes.  Start with a low figure - maybe €5k. Or else ask them to name a figure first. But the wife has to decide how much she is prepared to pay not to have a judgement mortgage registered against her home. 

Wife must insist that the husband's credit record is marked as "bad" so that he can't do this again.

Brendan


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## holly8 (9 Oct 2010)

thanks for the advice, really appreciated.

Husband or wife not trying to avoid paying the  business debts, its just they are hand-to-mouth at the moment.  Situation with the children makes it more stressful.  And what the bank has offered to date is impossible.

In offering the bank a re-settlement figure, is this maybe best done through a 3rd party?  or directly with the bank by wife?  Husband so stressed out with it all that he simply cannot deal with them.  

This is what wife has wanted to do all along but she does not know how to proceed.  

Would a lump sum payment (out of her savings account) be a better proposition to the bank - rather than her drawing down on yet another loan (she doesn't want to go there again, she is a saver not a borrower)

thanks again


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## Brendan Burgess (9 Oct 2010)

> Husband or wife not trying to avoid paying the  business debts, its just they are hand-to-mouth at the moment.



They are not living hand to mouth if they have cash on deposit and another property. Or they might be living hand to mouth, but out of choice.

It sounds as if the wife is competent and should do the discussions herself. I suppose she could pay a solicitor or an accountant to talk to the bank on their behalf, but that would be additional cost. 

If she has money on deposit, then she should use it rather than to borrow any more money.


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## Greta (9 Oct 2010)

If it were me, I'd pay the debt out of my savings but get the husband to transfer his share of the house to me, so such a situation could not arise again. After that if in future the husband manages to run up debts again, he'll have no assets and the wife wouldn't have to pay his debts like this again.
Another possibility is to change the ownership of the house, so that the wife owns 75% and the husband 25% share, instead of current 50/50.
The husband will have to agree to this, of course, and they will need a solicitor and the bank's consent.


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## holly8 (9 Oct 2010)

Greta said:


> If it were me, I'd pay the debt out of my savings but get the husband to transfer his share of the house to me, so such a situation could not arise again. After that if in future the husband manages to run up debts again, he'll have no assets and the wife wouldn't have to pay his debts like this again.
> Another possibility is to change the ownership of the house, so that the wife owns 75% and the husband 25% share, instead of current 50/50.
> The husband will have to agree to this, of course, and they will need a solicitor and the bank's consent.


 
except the mortgage is on a tracker and would any changes to current mortgage mean the tracker would probably be lost?


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## Greta (9 Oct 2010)

Holly, that's a good point about the tracker! I'd check with the bank about that. 

If the tracker would be lost, maybe it might be an idea for the wife to LOAN the money to the husband, to avoid losing the tracker? With a written loan agreement.

It just seems wrong for the wife to just pay off his debts without protecting herself somehow. After all, the amount is quite substantial and the husband hasn't even taken responsibility for his actions (has his head in the sand), so the wife is left to sort out all this mess.


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## number7 (11 Oct 2010)

Sounds like a strange marriage to me where written loan agreements and and individual debts are the norm.

Pay off the debts and dont be a skinflint, he is your husband not some stranger you just met. If he won the lotto next week end you'd change your tune pretty quick.


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## Greta (12 Oct 2010)

We are talking about very serious money here, he didn't just run up a couple of thousands in debt but frittered away about half of his's share of the equity in their house and is still not taking full responsibility for it. It's my opinion that it's better for the wife to protect herself and their children from having the same thing happening again. It's not so much the husband that she'be protecting against anyway, as against any future creditors. She is not legally obliged to pay her husband's debts and the only reason his creditors can get her to do it is because they have a claim against husband's share of equity in the marital home. So it doesn't seem "strange" to me that, if the wife may buy the husband's share of the equity (or part of it), she should do so, rather than just throwing her rainy day savings away at these debts, allowing the same situation to happen again in future.

It's better to have a "strange" marriage than to be bankrupted by an irresponsible spouse. It's actually an advantage of Irish law that husbands and wives are not responsible for each others' debts, it protects the family from financial ruin if one (but not both) spouse is irresponsible or has very bad luck.


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## number7 (12 Oct 2010)

Greta said:


> We are talking about very serious money here, he didn't just run up a couple of thousands in debt but frittered away about half of his's share of the equity in their house and is still not taking full responsibility for it. It's my opinion that it's better for the wife to protect herself and their children from having the same thing happening again. It's not so much the husband that she'be protecting against anyway, as against any future creditors. She is not legally obliged to pay her husband's debts and the only reason his creditors can get her to do it is because they have a claim against husband's share of equity in the marital home. So it doesn't seem "strange" to me that, if the wife may buy the husband's share of the equity (or part of it), she should do so, rather than just throwing her rainy day savings away at these debts, allowing the same situation to happen again in future.
> 
> It's better to have a "strange" marriage than to be bankrupted by an irresponsible spouse. It's actually an advantage of Irish law that husbands and wives are not responsible for each others' debts, it protects the family from financial ruin if one (but not both) spouse is irresponsible or has very bad luck.


 
If my wife tried to force me to sign over my share of equity in the house in exchange for assisting in clearing loans(when she had the wherewithall to do so) it would be the last time she called herself my wife. In any normal marriage there would be a level of complicity in each others lives. 

I run a company and my wife benifits from the income when times are good and shares in the negative when they are not,(as I share in her income) she would be fully aware of decisions being made and why they were being made and would have her oppertunity to make her opinion known.

Sham marriage is what spring to my mind. I dont disagree with taking prudent actions to protect assets and family home but those decisions should be taken jointly.

I would spend my last cent bailing out my wife if she needed it and I expect she would for me.


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## Greta (12 Oct 2010)

Number7, you should be more careful with your language - people are not in a "sham marriage" or "skinflints" simply because they hold different views on how to deal with financial issues in a family and what a "normal" marriage may be than you. My opinion is about the situation that this thread is about, not about yours or mine


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