# Best course of action for insolvent sister !



## zxcvbnm (26 Apr 2015)

my sister had investment properties. Was forced to sell at a loss by bank. (Properties are now sold ). This one bank (AIB)is her only debt. She now has circa debts of €150k. All unsecured. She lives in rented accommodation.

On residual debt the bank have offered a writedown and suggested a 10 year repayment plan. However - due to major monthly medical expenses she cannot affor the repayment plan (the back ignored her medical expenses when proposing deal).

Basically after the guidelines of monthly living expenses coupled with Her medical expenses she only has a couple of hundred spare in the month.

What is her best course of action?
Do the bank need to agree to a DSA / PIA anyway ?

What is a likely outcome if she goes down the official insolvency route ?
Would they accept a one iff lump sum from a third party ?

Could /would  the bank block the PIA/ DSA? If so what happens then ?

Looking for advice.

Thanks


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## zxcvbnm (27 Apr 2015)

Op here.

I've just read up a bit more. Do given that my sisters only debt is to aib, and they need to agree to a DSA arrangenebt anyway then an I correction thinking in practice the DSA route is not even applicable ?

The informal arrangenebt is inevitable for her given  her health issues. She obviously needs to prioritise health expenses or she won't even be able to work anyway. 

What is the most realistic outcome to this ?


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## Brendan Burgess (27 Apr 2015)

She probably needs to get a PIP to negotiate for her. 

A lump sum informal agreement should be possible as there is only one creditor.  

If they refuse one, could she opt for bankruptcy? 

Brendan


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## zxcvbnm (27 Apr 2015)

Babkruptcy would involve paying out for 8 years would it not ? It seems a very long time. (Albeit marginally more attractive than the 10 year proposed plan )

I guess my main query is seeing as the one bank are the only creditor, my understanding is they need to allow the DSA go through.
So in practice going for a formal arrangement really makes no sense if just one creditor right ?

Am I understanding it correctly ?


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## Bronte (28 Apr 2015)

Why did AIB refused to count the medical expenses.  What are the major medical expenses for?  There must be a reason the bank is not counting them.

Can you tell us her salary, out goings and how much the banks proposal would cost her.

If her living costs, including medical, means she has zero to pay AIB, then what can AIB do.


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## 44brendan (28 Apr 2015)

Agree with Bronte. bankruptcy seems totally unnecessary here. It is not a solution for those with no assets and on relatively low income (I'm assuming that her income is relatively low). So what are her options:
- Approach a PIP and agree a DSA. Only is she has excess income to meet a DSA payment (i.e. excess after meeting necessary medical expenses).
- Do nothing. AIB may progress for a judgment but if her income/outgoings leave little to no excess funds (presuming outgoings are reasonable) they will be unable to progress to an installment order. Judge will take account of necessary medical expenses. They probably won't bother doing this.
- Offer AIB a settlement sum from a 3rd party. I would make the sum relatively low and it would need to be affordable by the party offering it as realistically unless your sister's financial circumstances change in the next couple of years the bank will most likely just move on!!


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## Brendan Burgess (28 Apr 2015)

I don't agree with the "Do nothing and they will go away" advice.  If your sister gets an income or a lump-sum it will always be available.

It looks as if she is bankrupt, so apply for bankruptcy. 

The current period is 3 years + an income order for possibly 5 years. 

In practice, if she has no income the OA won't apply for an income order. 

And there is a reasonable likelihood that the 3 years will be brought down to one year. 

Try and do a deal with the bank first. If that doesn't work, go bankrupt.

Brendan


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## 44brendan (28 Apr 2015)

We differ in that context Brendan. Take advice from an insolvency practitioner. Few would recommend bankruptcy in such a situation. It was never designed for those in your sisters position!! Also remember that the debt will be statute barred in 6 years or possibly less.
I am in this business a long-long time and have yet to see a bank pursue a defaulter where there are clearly no funds available. Banks move on and despite all rumor to the contrary do not continually re-assess the financial circumstances of debts w/o!


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## Brendan Burgess (28 Apr 2015)

Hi brendan 

What's the downside of going bankrupt for her?  I think it's well worth it to bring finality to it. 

Brendan


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## 44brendan (28 Apr 2015)

Bankruptcy is the ultimate debt solution Brendan. It generally suits those with complex circumstances involving a number of creditors. In this situation we have a fairly simple case with 1 creditor and no assets/minimal income. In effect we would be using a sledgehammer to crack a nut by recommending bankruptcy. As I always say banks are pragmatic. We will progress cases as long as it makes financial sense to do so. When there are no assets and no excess income we do not continue wasting time. Does anybody need the hassle of the Official Assignee supervising their financial affairs for 3 years+ if there is an alternative?
While I respect that the "do nothing and it will go away" approach appears to be a  poor one in many cases it does work where a debtor is not in a position to repay and there is little likelihood of that situation changing in the short to medium term.
I am involved in writing off loans regularly in such situations and once we close the file it remains closed unless really exceptional circumstances arise (well publicized Lotto win etc).


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## Brendan Burgess (28 Apr 2015)

44brendan said:


> Does anybody need the hassle of the Official Assignee supervising their financial affairs for 3 years+ if there is an alternative?



I don't see why not if her affairs are very simple. The OA won't have that much impact on her life. 

Brendan


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## zxcvbnm (28 Apr 2015)

OP here.

Thanks for all the replies guys. As I mentioned above I'm very much near the end game with negotiations with bank. All properties are sold.

I may have over simplified the case in my original post. To clarify -  It in fact effects both me and my sister. We had 2 joint properties - and also one each separately.

All properties sold on demand of bank. Only issue is get some agreement on residual debt.

My sister has a net take home of 3,700 a month.(71k a year) She is single. However - severe mental health issues. Has been in a psychiatric hospital last 5 months on full pay from work. Work have now said they will no longer pay her sick pay going forward ( only discovered after bank offered most recent deal) - although she is now back at work. But who knows for how long. So if she misses s day then no pay. She could easily be out for a couple if months again in the near future.
She has medical expenses nearing 1000 a month which was reported to bank prior to deal offer.

I am a contractor based in UK. I was out of work for 6 months last year job hunting - which can be part and parcel of freelance contracting. I am in £400/ day now in a 5 month contract.

The deal is over 10 years.
100k joint and several @ 9% interest.
And 40k to me separately. @ 9 % interest.
Failing to make repayments at any point over 10 years results in all written off debt being brought back into play. This is a condition of their deal.

Without question she will have periods of illness again in the future judging by her past medical history. Meaning the joint and several part all falls to me in practice. I wouldn't even ask her to contribute even if she has a spare couple of hundred on any given month just to give her a mental break. She would need to safe orangery in anticipation of out if work in no pay in the future again.

When I say they ignored Her medical expenses what I mean is it would require me to pay c. 2000 a month every month  for a decade basically.
If I could guarantee that surplus I wouldd have never had to sell the properties to begin with !
So on that basis I'm assuming they simply cannot realistically expect me to pay that - so im sssuming they ignored her medical bills (they never requested any proof which was offered by us - they just came back with this offer)

I'm working now as a freelancer. I May well be out if work  next year again. She may be out sick sith no pay.

I don't think anyone in good faith can sign up to such a lengthy repayment plan  - particularly given that all written off debt is called back in if repayments are not maintained.
With this offer in theory we coujd successfully pay it back for 5,6,7 years - run into financial trouble later on putting us back at square one again.

It just seems a bizarre lengthy offer by the bank. The reality is the write down is an illusion. In the real world there is no write down.

Have asked for a face to face. Awaiting reply.
I can go bankrupt if course meaning she is then lumbered with the 100k joint and several. Which is what led to the original post.
Essentially is a DSA a non runner seeing as she only has one debtor anyway. I brlieve 65% of debtors must agree - meaning the bank have full say yes?

So if I'm correct and I go bankrupt and the bank don't budge then it's basiccsky ignore bank or bankruptcy for her ? Is that a correct analysis ?


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## zxcvbnm (19 May 2015)

Hi guys. 

Sorry to bump thread.
I have met bank. No budging them in their unrealistic offer.

I am in UK. Ive decided I will most likely go bankrupt.

All debt then goes to her. (Joint and several)
She can't afford to pay anything of any substance at all really.
However - we want a formal line drawn under it for herto avoid any recall from bank in the future. (In the event of inheritance for example )

So - back to the original question.

Is bankrupycy or DSA the best way forward?
The one bank is her only debt.
Do they need to approve DSA (65% of creditors must agree I believe ?)

In practice what is the likely outcome of DSA ?
Presumably in bankruptcy she is in more control as bank can't block it.


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