# What will my mortgage provider do if I go bankrupt?



## machi (5 Jan 2014)

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


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## Brendan Burgess (5 Jan 2014)

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


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## magnum (7 Jan 2014)

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?


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## javanaise (7 Jan 2014)

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.


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## Bronte (7 Jan 2014)

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.


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## javanaise (7 Jan 2014)

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/


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## 44brendan (7 Jan 2014)

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).


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## michaelg (7 Jan 2014)

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 .


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## 44brendan (7 Jan 2014)

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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## michaelg (7 Jan 2014)

Yes thats true Brendan, sorry if i was unclear,  if you dont go bankrupt i was told they will chase you for the shortfall.


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## 44brendan (7 Jan 2014)

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!


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## Steve Thatcher (7 Jan 2014)

michaelg said:


> Yes thats true Brendan, sorry if i was unclear,  if you dont go bankrupt i was told they will chase you for the shortfall.




And as it is debt that pertains to land they can chase it for 12 years.

Steve Thatcher


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## Steve Thatcher (7 Jan 2014)

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.



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


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## Steve Thatcher (7 Jan 2014)

michaelg said:


> 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 .



Almost everyone coming to me at present has the same tale. Convert the shortfall to a 29 yr mortgage and repay it at four percent. So big debt, no house. Square 1.

Steve Thatcher
www.stevethatcher.ie


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## Steve Thatcher (7 Jan 2014)

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.



Bronte, how do you quantify these costs?

Steve Thatcher


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## 44brendan (7 Jan 2014)

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.


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## magnum (8 Jan 2014)

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?


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## Matthew Moore (8 Jan 2014)

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?


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?


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?


Yes, they can't ask you to live on anything below the reasonable living expenses and accommodation allowance for your circumstances.


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## Matthew Moore (8 Jan 2014)

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.





Steve Thatcher said:


> Bronte, how do you quantify these costs?
> 
> Steve Thatcher



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


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## Steve Thatcher (8 Jan 2014)

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.
> ...



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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## Matthew Moore (8 Jan 2014)

Steve Thatcher said:


> 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



Do they have published living expenses in the uk like we have here? 
I know the accommodation would vary greatly depending on area but I'd imagine food, clothing, transport allowances are the same everywhere.

The OA has said he would like people to enter the income payments agreemnets as early as possible therefore the majority of it should be when you are in the bankruptcy. Is this the same in the uk?

I think an updated comparison of Irl -v- uk costs and allowances would be a great idea now that we have a bit more of an idea how this side works. I think I read an excellent comparison you did before but it was based on the old system.


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## Steve Thatcher (8 Jan 2014)

pat2 said:


> Do they have published living expenses in the uk like we have here?
> I know the accommodation would vary greatly depending on area but I'd imagine food, clothing, transport allowances are the same everywhere.
> 
> The OA has said he would like people to enter the income payments agreemnets as early as possible therefore the majority of it should be when you are in the bankruptcy. Is this the same in the uk?
> ...



Food is £275-£300 per person on average
Clothing £42 per person
Transport as is, A car is allowed of required upto £15000
Holidays are allowed at up to £80

In UK you also have to have income payments put in place within 12 months, if not in place then they can never come after you.

UK petition fee £700

Obviously it is possible to do it yourself as in ireland

Steve Thatcher


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## ellenb (13 Jan 2014)

Regarding the £250 costs paid by lender for accountant, this appears to only apply if you are offered a long term alternative arrangement such as a split mortgage. This allows you to get a better idea of the overall cost of that arrangement. 
It apparantly does not apply in the case where they are refusing to offer an alternative arrangement either due to lack of contact from lendee or mortgage is deemed unsustainable and you now have the option to sell or surrender. 
I had assumed it would apply at either point-but apparantly not. We are now out of MARP process as lender decided not to offer us an alternative arrangement and will be taking legal action in next 3 months unless we make a decision as laid out by them. I would have thought an accountant at this point might have been helpful. But apparantly we are past that. An accountant a year ago might have been helpful too. But apparantly we were not in need then because they refused to offer us any long term solution.
Great system. Round of applause. I hope the people who put the code together are really proud of themselves.


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## Bronte (14 Jan 2014)

Steve Thatcher said:


> Bronte, how do you quantify these costs?
> 
> Steve Thatcher


 
It costs about 5K with people like you to go bankrupt, then the person needs a deposit in the UK, rent and living expenses. As far as I can tell people are going over there with a 'war chest' to see them through the year. Others I'm guessing are staying on relatives couches, some probably are not really there at all and will have flight costs, and others will have signed on in the UK. 

The Irish option is cheaper always because you're in your home country and have more options, dole is better in Ireland, you have relations if necessary to stay with, fees are less than 1K (or will be when the advertising cost is removed).

Personally if it were me, I'd do the sharp, painful, short, clear, precise UK option.  I'd say about 20K would do that.  But problem is most people don't have that.  Others of course do, hidden money, or money from rentals saved up, or spouse having money etc.  You know all this far better than I.


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## Bronte (14 Jan 2014)

pat2 said:


> there is the €250+vat that mortgage lenders will pay for you to meet a accountant for financial advice.


 
Did you go down that route? Personally I thought that option was one of the more hare brained schemes that is designed not to solve anything but to create money for professionals.  And I believe the take up response has been abysmal.


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## Matthew Moore (14 Jan 2014)

Bronte said:


> Did you go down that route? Personally I thought that option was one of the more hare brained schemes that is designed not to solve anything but to create money for professionals.  And I believe the take up response has been abysmal.


No I haven't done it yet, I wasn't aware of it until recently. I will make use of it if there is something I'm unsure of. I wouldn't agree that it's hare brained in theory. If people were being asked to make serious decisions without any access to professional advice there would be uproar and rightly so. I can't comment whether the advice they give is appropriate or worthwhile. I read somewhere recently that less than 1% of applicable people have availed of it.


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## Bronte (14 Jan 2014)

pat2 said:


> . I can't comment whether the advice they give is appropriate or worthwhile.


 
There's the rub, they cannot give you any advice.


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## Matthew Moore (14 Jan 2014)

Bronte said:


> There's the rub, they cannot give you any advice.



What do you mean? Surely that's the whole point of the service?


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## Bronte (14 Jan 2014)

No it's not Pat.  The bank gives you options, your accountant may explain the options to you, but he cannot give you any advice or suggest you negotiate or refuse the banks options. 

It's a total nonsense, we debated it here on AAM ages ago.


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## Matthew Moore (14 Jan 2014)

Bronte said:


> No it's not Pat.  The bank gives you options, your accountant may explain the options to you, but he cannot give you any advice or suggest you negotiate or refuse the banks options.
> 
> It's a total nonsense, we debated it here on AAM ages ago.



Hmmm, sounds more like an interpretation service than advisory!


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## Bronte (14 Jan 2014)

That's exactly what it is Pat2. But don't rely on me.  In any case what did you expect, something that actually worked !  Or even something that was of benefit to distressed people.  Or more accurately a complete waste of time and money.


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## DebtCert (16 Jan 2014)

It is being reviewed with a proposal to expand the scope of the service:

http://www.welfare.ie/en/downloads/MAIAS-Review-Report.pdf


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## Bronte (16 Jan 2014)

DebtCert said:


> It is being reviewed with a proposal to expand the scope of the service:
> 
> http://www.welfare.ie/en/downloads/MAIAS-Review-Report.pdf


 
That's lovely stuff DebtCert. I think the figure of 100 people availing of the 'service' tells it's own story. And they need 44 pages to figures out something is wrong ! All these reports, and different departments, legislation that took 2 years, has had to be changed at least 3 times already. 

I wonder how much it cost to produce that little report.  

Why didn't they just copy British law word for word, and set up a similar service that is easily accessible and cheap, and one that actually works.


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## Brendan Burgess (16 Jan 2014)

Bronte said:


> Why didn't they just copy British law word for word, and set up a similar service that is easily accessible and cheap, and one that actually works.



Because the PIA is the first legislation in the world which facilitates the insolvent person retaining their family home.


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## Bronte (16 Jan 2014)

Brendan Burgess said:


> Because the PIA is the first legislation in the world which facilitates the insolvent person retaining their family home.


 
And why did we do it differently?  Does it make sense?


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## DebtCert (16 Jan 2014)

Tackling the issue of mortgage arrears would be ineffective unless provision is made for dealing with mortgage-related insolvency, hence the need for the legislation to include secured debts.


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## Brendan Burgess (16 Jan 2014)

Bronte said:


> And why did we do it differently?  Does it make sense?



I don't really think so. In every other country, if someone falls into arrears on their mortgage, the home is repossessed and sold.  

But let's not take this thread off topic. Feel free to start a new thread on it.


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