# "Unsustainable mortgage"



## Brendan Burgess (22 Jan 2013)

_Posted by user "needtodo" but is being automatically moderated for some reason. _

Hello
I would really appreciate some advice.
My husband and I have a mortgage of 540k. We are in arrears of 3k. House  worth 290K now. We are currently on our 3rd temporary arrangement  (which we have always adhered to). The mortgage is with Ulster Bank,  fixed interest rate 4.95%. 
The repayments each month are €2,500. We have 37 years remaining on a 40  year mortgage term. Our TRS will finish this year and we come off the  fixed interest rate this year (further increasing the repayments) We  also have a credit union loan €6k and credit card bill of 3k and over  draft of €8k. Combined income is 70k.

I am self employed. Income has reduced by 60%. Husband is in employment.  We cannot and will not ever be able to meet the mortgage repayments. We  now have 3 children (triplets) so I cannot actually afford to go back  into full time employment (it would cost €1,850 to have the minded). We  live in the country (Carlow) so we both commute to Dublin. Both our jobs  require that we have our own transport. We sold one car but cannot sell  the other as we need it. It is a 2003 so the tax is high. Fuel costs,  maintenance etc is high - but we need a car for work. We use public  transport when we can. The cost of actually going to work is  disproportionately high but we cannot give up work or find a job in  Carlow/locally.

My question is what do we do? The mortgage is unsustainable. I know an  option is to go to the UK and declare ourselves bankrupt. I also know  that the Personal Insolvency route will be available mid year - but what  realistically will they do for someone like us??
My husband is of the view that I am on drugs to think that the bank will  ever write off a portion of the debt for us as we have earning  potential (i.e, I will return to full time employment in a number of  years and my husband is a professional in employment earning). I dont  want to be at the mercy of the mortgage debt for the rest of our lives.  We cannot even afford a pair of shoes at the moment. I have cut all  unnecessary costs etc. Renegotiated loans with credit card co, credit  union etc). The house has a lowest energy rating so costly to run too. I  did love it but after 4 years of worry, love does not come into it  anymore.
It wont sell  - we have it listed since 2009.
So we cant sell the house - no one wants it, the car - we need it, plus  we would only get 3k for it and then have no way of getting to work. We  have no saving, assets etc.
I know we were idiots.

Many thanks for your time.


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## Brendan Burgess (22 Jan 2013)

Hi needtodo

First of all, I don't know why your posts are being automatically moderated. I have left them "awaiting moderation" as I want to investigate it furhter. Hopefully, you will be able to reply to these posts. 

Your mortgage is €540k and the UB SVR is actually 4.5%, so your repayments will come down a bit when the fix is over. The interest on your mortgage will be around €2,000 per month.  From the sounds of things, you cannot afford to pay any more than this, so you ask the bank for interest only. If they don't agree, then just switch to interest-only anyway. 

Check your mortgage agreement.  Is there any chance that you are entitled to a tracker when the fixed rate ends?  Don't rely on what Ulster Bank tells you - check your documentation. A lot of UB customers have got trackers when they were told that they were not entitled to them.

It's hard to know if UB will do anything for you.  You are able to meet the interest, although with a struggle, so it's unlikely that UB will agree to anything else. 

It's possible that a Personal Insolvency Practitioner might put a proposal as follows: 
1) Write off the negative equity
2) Reduce the unsecured debt by 50% 
3) Pay the reduced mortgage over 40 years and pay off the unsecured creditors over 6 years. 

If you stick to that schedule, then the negative equity would be written off after 6 years. 

UB can veto this proposal.  We don't know how they will react. 

An alternative would be to hand back the keys and rent a house in Dublin closer to work.  

You would then enter into a Debt Settlement Arrangement.  UB could veto it, but they might not see any point in vetoing it. 

So check your mortgage to see can you get a tracker. 

If not, put a proposal yourselves in writing to UB to split the loan into €300k serviceable and €240k suspended. Alternatively offer to hand back the keys. 

Brendan


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## g05l (23 Jan 2013)

@Brendan, does it allow to Write off the negative equity if person go through the PIP?


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## Dr.Debt (23 Jan 2013)

I dont think there is any appetite among banks , as yet, for writing off this type of mortgage debt. Your income is actually quite good and your unsecured debts are not that unusual or unmanageable

I think your best route is through direct negotiation with your bank.
As was said already, if you could get them to agree to suspend half the mortgage debt and you agree to service the other half, your immediate cash flow difficulty will be solved.

If the banks will not listen, I would then be inclined to go the "Personal Insolvency Act" route. The Act places special emphasis on trying to keep debtors in their homes. If the bank choses not to consent to the Insolvency Practioners proposal, I think it will strengthen your hand if you finally end up in court.


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## g05l (23 Jan 2013)

@Dr.Debt, is there a guideline how to start ''Personal Insolvency Act'' route (step by step)?


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## Dr.Debt (23 Jan 2013)

The PIA was passed into law at the end of 2012, however it wont go live for a number of months yet.

Within the act there are several routes that a Debtor can take covering secured debt, unsecured debt and bankruptcy

The 1st step will be to appoint a Personal Insolvency Practitioner who will be responsible for guiding you through a fairly lengthy process.

If you want a blow by blow account of what is involved,you could attempt to read through the Act itself or alternatively, there are several summaries contained in the Personal Insolvency Bill section of this website


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## g05l (23 Jan 2013)

Dr.Debt said:


> The PIA was passed into law at the end of 2012, however it wont go live for a number of months yet.
> 
> Within the act there are several routes that a Debtor can take covering secured debt, unsecured debt and bankruptcy
> 
> ...



the goal would be to keep the property, get the negative equity written off and then continue to live (however with a lower debt).

Would the Personal Insolvency Bill be a good resource to sort these issues?


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## Dr.Debt (23 Jan 2013)

You could aim at having debt written off but I cant see this happening apart from,in very extreme cases where there are very few assets and little or no income and little prospect of future change in circumstances.

Just remember that proposals made under the Personal Insolvency Act will (in most cases) need to be agreed to by the bank who holds the mortgage on your house.
The proposal will need to be reasonable and realistic. If you propose wide scale write offs of your debt, the most likely outcome is that the bank will veto the proposal.

Reasonable proposals will have some chance of success. The skill and judgment of the PIP who is designing the proposal will have have a large bearing on the outcome.
The banks will only agree to proposals that are in their best interests. If the bank is likely to get a better result by going a different route, then the expectation is that the bank will go that other route.


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## 44brendan (23 Jan 2013)

The Government are committed to introduction of the new Insolvency Legislation by the commencement of Q2 2013. However PIA will have no real impact for these clients. Dr Debt is correct in that the Bank could not realistically decline a reasonable proposal and then expect the Courts to listen to them if they commenced proceedings. 
In reality the Bank will be satisfied for at least the medium term if the clients can continue to cover interest on the mortgage. In terms of "PIA" clients would be entitled to reasonable living expenses before any repayment capacity is calculated. This is another outstanding issue to be decided by the Insolvency Director (Lorcan O'Connor). Also unfortunately, the new legislation will not force banks into agreement to a W/O of unsustainable portion of mortgages (the legislation is not designed for this purpose). 
The potential for UK bankruptcy remains for the moment, but would be difficult where both parties are in employment in Ireland. The EU are proposing to bring in legislation in the short term to cut-off the relaxed "COMI" rules, which facilitates bankruptcy tourism.


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## g05l (23 Jan 2013)

44brendan said:


> The EU are proposing to bring in legislation in the short term to cut-off the relaxed "COMI" rules, which facilitates bankruptcy tourism.



when is that due to become a real problem (for people)


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## 44brendan (23 Jan 2013)

Insovency accountant recently advised that EU were tightening this loophole. Expectation is that activity has commenced to introduce the required legislation and it should be in place prior to the end of the year.


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## g05l (23 Jan 2013)

certain people (outside EU) mentioned that there are no written formulas in any of EU country laws (Include the UK and it's bankruptcy regime).
Rumour is that the UK bankruptcy will not really let the Irish people get off the hook (there is a point that Irish banks may not accept UK Judgements) and once people return to Ireland (from UK after discharge in UK) they may face troubles from Irish banks (at certain point (after many years), thus when the very same people become financially sound) as no line in UK bankruptcy laws clearly states that the Irish debts are fully cleaned by this bankruptcy.

Returning to your answer: does it mean that current ''tourists'' may need to make up their minds within next 10 months to commence such routes? - by the end of this year.


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## 44brendan (23 Jan 2013)

I'm concious of not taking this post off topic, but essentially that is what it does look like will happen.


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## g05l (23 Jan 2013)

Does it mean that UK bankruptcy judgements can be nullified by Irish Courts (based on the applications from the Irish banks)?

Could you please provide any link or some sort of reference to what was told in post 9


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## bugler (23 Jan 2013)

It isn't at all clear if the OP wants, or should want, to retain the current home. 

The OP is undertaking an arduous and relatively expensive commute. Having read the initial post my initial reaction was they would be better served by seeking out somewhere to rent closer to work. Maybe get a 2-3 year lease on a house at a reasonable rent and start to recover some quality of life.


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## needtodo (23 Jan 2013)

Many thanks for your replies. Brendan I remortgaged 5 years ago and agreed to give up the tracker then - is it still possible that we may be entitled to it? I will get out the paperwork and check in any event.
We are not even paying the interest. We are paying 1,300 per month. The only frills we could stop paying are income protection - 92 euro. I could also sell my engagement ring and wedding ring and clear the credit union loan. This would free up another 250 euro pm. 
From reading the replies I am forming the view that we could put a long term proposal to the bank now (perhaps with the assistance of a suitably qualified person), instead of waiting for the Act to become operational. Assuming it is fair and realistic, if it is refused then perhaps we can then utilise the act or indeed go to the uk.
Is there any guide from the uk on what reasonable living costs for a family of 5 are?


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## needtodo (23 Jan 2013)

Meant to ask - who could help us to put a realistic proposal together - an accountant with insolvency experience?


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## Bronte (24 Jan 2013)

Before you decide to hire anyone it is not exactly clear what it is you want? Some ideas

1. Leave the house and move to Dublin and let the bank come after you

2. Negotiate with the bank a write down of the mortgage to a sustainable level on a salary of 70K

3. Continue paying 1300K a month and forget about it until the new insolvency regime

4 Go to the UK, losing your job, but you'd be debt free within a year or so but could start again.

Could you give us an idea of your income and expenditure, so far we've 1300 Mortgage and 250 Credit union.

Do not sell your rings, you'll only regret it, in any case it's not necessary and is a sign of someone in despair, you might need help for that, and triplets is not easy. Can you try and tell us what would be the best for you.

Not trying to go hard on you but you mentioned being tied to a mortgage forever, you did sign up for a 40 year mortgage, when people do this, this is exactly what they do. That's why on here I'm forever warning people not to get long term mortgages. I'm just pointing this out again to people who are currently thinking of borrowing long term.

I imagine you cannot see the wood for the trees at the moment so if you could just focus on the I & E on here we might be able to give you some better ideas.  

Where are you getting the value from for the house?


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## needtodo (24 Jan 2013)

Hi Bronte

Thank you for your reply.

This is the list of our monthly bills:
House insurance – 60
Car insurance – 40
Car tax – 76
Mortgage (2,500) – 1,380 (temporary arrangement)
Heating – 170
Life insurance – 90 
Car maintenance – 208
ESB – 100
Phone – 100 (this includes broadband for work)
Household charge – 8.33
Credit union loan – 250 (minimum payment)
TV Licence – 13.33
Doctor – 50
Credit card min payment – 70
Childcare – 650
Diesel – 400 (commute from Carlow to Dublin each day)
Income protection – 92
Food etc - 700

Total - 4397

Combined income plus child benefit = 3,998

Some bills are high – such as the car but we cant sell it or afford to change to avail of the cheaper road tax.

Both our families live in the same area. We don’t want anyone to know of our financial problems.  Yet I think this now looks inevitable. Equally, we don’t want this financial misery over our heads until we are 77 years old. 

The house was valued by an Estate Agent at 290k as it is unfinished. We think we could get 330k for it.

What do we want to do in order of preference?

1.	Remain in our home and negotiate with the bank a write down of the mortgage to a sustainable level. Fantasy?????

2.	Personal insolvency legislation – if we are eligible –a write off of some of the debt. Remain in our home.
3.	Negative equity trade down – to a smaller, more economical house – closer to work, with some write off on the negative equity.
4.	Voluntary surrender with some debt settlement.
5.	UK – Bankruptcy.
6.	Split mortgage.


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## 44brendan (24 Jan 2013)

AAM is fine for general information and broad outline on issues. However, you need specific guidance in respect of your own circumstances and in putting together a proposal for dealing with your debts. I.e. you need the guidance of an experienced practitioner in this area. MABs, appears to be totally overburdened at the moment and can be hit or miss on whether the advice they give is best possible.
You need a reference to a good accountant who specialises in this area. Perhaps someone from AAM could point you towards someone in the Dublin/Carlow area, who can provide you with proper advice at a reasonable cost!


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## Importer (24 Jan 2013)

Great advice on here from 100 different accountants and much better value and quality than anything youll pay for 
Accountants are not really qualified in this area either and advice from Accountants can be just as hit and miss as anywhere else.
At least on AAM you get a lot of different views and anyone with a small bit of savvy can figure out the salient pieces of advice 
from the more credible contributors


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## needtodo (24 Jan 2013)

I would really appreciate if someone could recommend someone.

The general pointers on AAM has been most helpful thanks.


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## wbbs (24 Jan 2013)

Grant Thornton seem to be lining themselves up to be one of the firms dealing with the new insolvency regime, they are holding seminars around the country for people working in associated areas finishing tomorrow I think.  Was at one  today in Limerick and it was very interesting, might be worth trying them.


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## Bronte (25 Jan 2013)

Before trying anyone, one would need to know if one can afford it. I don't imagine Grant Thornton come cheap. 

And I don't believe that someone with a bit of financial acumen cannot sit down and work out the best solution themselves.  And help from someone impartial and competent in Mabs would be invaluable.


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## Bronte (25 Jan 2013)

needtodo said:


> Total - 4397
> 
> Combined income plus child benefit = 3,998
> 
> ...


 
Unless I'm mistaken your outgoings with reduced mortgage is 4457 not 4397. On an income of 3998. So all your are doing is sinking. Perfect position to come to an arrangment with a bank I would have thought. 

If option 1 is your favourite option why don't you try it. Make contact with your bank. Depending on the bank some of them are being realistic, arrange a meeting, have all your facts and figures and see what options they are amenable to. Until you know their current thinking you cannot move forward. 

What is quite clear is that your mortgage is unstainable. Please have a realistic value of your house if you meet them. They will focus on that and your income and expenditure.

One last point, you along with many others are hiding your financial difficulties, I can understand why, but this is not healthy.  I certainly hope you are talking to your families and that they realise the strain you are under.  You are not alone, there are plenty of people right around you in the exact same situation but bottling it up is the worst thing to do.  In addition it can make a marriage difficult and not only that you have 3 youngs kids.  You need emotional as well as financial help and both are just as important.


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## needtodo (25 Jan 2013)

I cannot move on off what idiots we were. We just got caught up in getting out of the city and buying a family home to start a family. I am ashamed of the decisions I made and the amount of savings and interest payments gone into this house which would have paid for a house by now. We didnt stop to think. Anyway, I need to deal with this now. many thanks for your post and advice.


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## wbbs (25 Jan 2013)

My understanding of the new system is that the cost comes out of the pot of available monthly surplus that is to be paid to the creditors so effectively there is no extra cost to the person applying, the creditors bear the cost.  I think there is no point paying anybody right now to do something for you when the new system is so close.   You could put yourself on the list for a MABS appointment in the meantime although they will be of limited use as they will only be dealing with the under 20k debt but they may be able to advise a strategy to follow until PIPs are set up.


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## alica (25 Jan 2013)

Hello Needtodo,

really sorry to hear about your circumstances,
but there are loads of people in similar.
we bought a house in co.Wexford , both lost jobes and found new ones in Dublin only, so I can understand that commuting costs are huge ...

I can not offer you way to reduce your mortgage repayments, but you might try to reduce your commuting costs by finding another persone with similar working shedule and share costs with them.

try website : *carpool *(sorry, can not post URL)- it is not common in Ireland (yet), but working...

another point - you might be eligible for GP visit card with your childcare and fuel costs as well.

childcare - we have 2 small kids, can not afford creche, but it is possible to find childminder in rural area - they are charging less ...

are there are any possibility to have an au-pair?

or rent a room ?


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## ronron (30 Jan 2013)

Dear Needtodo
Let me say that in your case, you need to stop worrying and resolve to focus on your future. In terms of the Personal Insolvency Act , your mortgage is the problem, followed by childcare costs and commuting. 

Please refer to a website misc which allows one to calculate the income required to live in an urban or rural area depending children etc. Under the Insolvency Service, debtor expenditure  may refer to that site, which is prepared by MABS and the Vincentien Partnership, to show the minimum income required to live a frugal but sustainable lifestyle. 

I set out below assumptions, which may be wild, on which to base a proposal for a PIA. 

You advised your income already of €3998 p.m., and I use that below, but it sounds like it would be cheaper to give up living in Carlow and move to Dublin, but that is a personal choice.

Statement of Affairs 
One issue is the value of the PDH. Given its location, I assumed a 70% discount on the mortgage to €160k, as there has been no offers made. Also, I assume the discount is germane to a purchase in the peak of the housing market to arrive at a valuation. If the assumption is correct your SOA may be as follows: .

	                Stat. of  	 	 	 
 	                 Affairs 	Secured	Unsecured	Total
Assets	           € 	         € 	          € 	                   € 
PDH		 		 
Estimate      162,000 	162,000 	               -   	     162,000 
	           162,000 	 162,000 	               -   	     162,000 

Liabilities		 		 
Mortgage	      540,000 	     162,000 	     378,000 	     540,000 
Credit Union   10,000 	               -   	       10,000 	       10,000 
Credit Card      3,000 	               -   	         3,000 	         3,000 
Bank Loan	6,000 	               -   	         6,000 	         6,000 
	             559,000 	     162,000 	     397,000 	     559,000 

Deficit	-    397,000 	               -   	-    397,000 	-    397,000 [/U]


Please note that UB will have voting control given they are the majority unsecured and only secured creditor.


Income and Expenditure 

I set out below your surplus arising on income based on the misc site and compare the outcome under a PIA and Bankruptcy. The key assumption is that UB accept a write down to €160 k (the value of the security). 

Under a PIA, I assume and propose UB grant you a 35 year mortgage at 3.69%. This will generate a surplus of €134 per month to pay the unsecured creditors. If UB accept that, they will share in the dividend of €9648 in total over 72 months, and may avoid legal and recovery costs. Furthermore, I assume that if you return to work, you may be able to offer more comfort that they have an affordable mortgage.

If UB veto the proposal, they will get nothing, as you will have to move to Dublin and l assume the rent there will deny the possibility of a dividend in bankruptcy.
	                                             PIA 	         Bankruptcy
Income and Expenditure   	        € 	           € 

Combined Income	                        3,998          3,998 
Expenditure  ex Rent/Mortgage       3,228           3,228 
Available for Rent or Mortgage	         770 	      770 
Rent or Mortgage	                          636 	    770
Available for creditors per month     134 	             NIL

Dividend over 72 Months 	   9,648 	        NIL
Expenditure per Misc  - ex Rent/Mortgage	RURAL

RON


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## ronron (30 Jan 2013)

Dear all,

sorry I came unstuck in formattting my last mail on a comparison of the dividend on a PIA verus Bankruptcy. I hope I corrected that below.

"If UB veto the proposal, they will get nothing, as you will have to move to Dublin and l assume the rent there will deny the possibility of a dividend in bankruptcy.
                                                              PIA                  Bankruptcy
Income and Expenditure                        €                          € 

Combined Income	                              3,998                3,998 
Expenditure ex Rent/Mortgage             3,228                 3,228 
Available for Rent or Mortgage	               770                    770 
Rent or Mortgage	                              636                       770
Available for creditors per month           134                         NIL

Dividend over 72 Months                        9,648                     NIL

RON


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## Knuttell (30 Jan 2013)

> This is the list of our monthly bills:
> House insurance – 60



€720 a year for house insurance is very high almost double what I would have expected.



> Income protection – 92



Income protection is one of the first things I would have jettisoned,it works out at €1104 a year. Alot f those policies are not worth the paper they are written on.



> Phone – 100 (this includes broadband for work)



Shop around,Vodafone do land lines and BB from €40 pm

I know its not a lot but these savings add up also have you switched utility providers?


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## needtodo (31 Jan 2013)

Many thanks for all this info


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## dodo (31 Jan 2013)

You need to act now and stop kicking the can down the road, 
The rule of thumb is no more than 35% of your wage should go on your mortgage, at even the 1380/3998 comes in at the limit, 35%,  but if you take the 2,500/3998 it is 62%, 
You have done nothing wrong like so many others but just another casualty of this awful mess we find ourselves in.
You need to do what is best for you and your family, wait for the new bill and if you get no luck there then UK is the way to go,Not sure if you all would need to move to UK or maybe just one of the you would need to move to UK and become bankrupt. You you not deserve all this headache as it may have a bad ending on your health, So put yourself and family first and make a fresh start


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## Gerry Canning (1 Feb 2013)

need to do:On your expenditure, suggest check the Income Protection {see payment protection insurance thread} Sadly most income protection policies are not what they appear , so you maybe paying for (poor) cover.Likewise check your Life Insurance ,to make sure it suits your circumstances .
Nobody really knows how the Personal Insolvency will REALLY work. I would think {given the amount of genuine inability to pay when due} that the lenders will come to arrangements, call it (write-down,deferral,etc)  or whatever.. eg have you pay on the portion you can fairly afford and park the rest , it could be that if you adhere to the new arrangement the residue is written off .ie YOU HAVE TO BE INCENTIVISED, otherwise the arrangements WILL fail. The Banks won,t like it but methinks ,IS THERE a VIABLE choice ??


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