# Is there an alternative to bankruptcy for this situation?



## Artemis (1 Jan 2012)

First post, so hello all!
I am self-employed (37), small business employing my wife and I, combined income of 65K, with two kids under 5. 
On our family home, we owe 350K, is currently worth 300K. Our mortgage is 1400 pm month which we are paying.

On property investments, which was to be a pension fund, we owe 1.1  million, currently worth 600K, one property worth up to 200 is overseas  and the deeds are with solicitor in Spain. Income is 2K per month,  interest only is 4K per month.

Therefore we are capitalising 2K per month on a depreciating asset with  major expense and headache with tenants, maintenance ect.

Our family home is with a different bank than our investment properties  and is not listed secuity on the investmetn properties. We can manage  the 1400 per month, buth that is about it.

As the economy picks up, we could likely afford another 500 PM to pay  debts. It is unlikely that we will ever be able to pay back full debt so  are we better to declare bankrupt. 

Our preference would be to sell all properties for what the market will  pay, commit to paying an amount to the bank for a number of years and  eventaully get on with our lives.

At one stage, I employed over 70 people (services industry, not  construction, before you ask). I need to deal with this issue one way or  another to start again.  (My new business will never scale to this size  due to health and other reasons). At best 50K each per year

I am wondering what would the likely response of the bank be to the 500 PM?

How safe is my family home if I can't do a deal with the bank?

Like many people in my position, I need to resolve this in some shape or form as I think about it 24/7. 

Thanks in advance for any comments.


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## oldnick (2 Jan 2012)

No proper advice possible without more facts.
e.g. are all properties bought with loans from one bank? Including spanish property?
What interest rate are you paying ? 
What is the average yield per property (based on present value and nett pre-tax rent)?  
Is the health issue likely to disrupt the running of the business? 
Do you have a cash flow advantage in your bsuiness (customers pay you but you can delay paying suppliers) -or is it the other wy round with you risking non-payment from customers?

This is master-plan stuff that requires more info' , without which you may be wrongly guided.
For example, looking only at what you've said I'd say declare bankruptcy and you could end up earning nett nearly as much as you're earning now (from the state in terms of payments and benefits) and you can concentrate on your family. You're still young and health and family are more important.
But that's just my primary reaction and may be against your nature.
And ,as I say, there may be some facts on which one could have a better basis for advising.


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## Artemis (2 Jan 2012)

Hi Oldnick,
Yes, all investment properties are linked to one loan with one bank. Private home is with a different bank.
I am not sure on the yield but as it is only 50% of interest only, it is low.
We wait to be paid, typically 1 month.
I would rather not to declare bankruptcy and live of the state. I want to get up and go to work every day, but I also want to know if I manage to pay for my house in 30 years, will I be handing it over to the bank.


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## RichInSpirit (2 Jan 2012)

New beginnings might be able to advice you about this.

What if you just handed back the keys on the investment properties ?  or just stopped paying the mortgages on them?  And kept paying the mortgage on your family home. 
Could anyone force you into bankruptcy ? 
I don't know. 

A good accountant and/or solicitor might be able to give you good advice here too from a dispassionate point of view, and give you an angle that you mightn't have considered .


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## Artemis (2 Jan 2012)

Thanks for the post. To be honest, bankruptcy does not scare us. In the here and now, it would cost us less and end the headache. 
However, we would not want to go down that road. It is a lose, lose for all, us, the bank, society at large, including those in favour and against debt forgiveness.

What we are looking for is an alternative, where we start from the current situation, where the bank get something, but we are not sentenced to unknown slavery for life.

Is there a middle ground between debt forgiveness and bankruptcy?


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## oldnick (2 Jan 2012)

Artemis -I'd hoped you'd get a few responses from an expert. Although I'm more of a gas-bag than an expert I'm taking the liberty of commenting again...

There is no middle ground, except  coming to a debt consolidation or loan restructuring plan with your lenders.  You can do this yourself but there are experts who can do this for you- some accountancy companies specialise in this and, naturally, charge. At the very least ring around/google and see the cost.
( Paradoxically, the companies that advertise bankruptcy services  make their money from helping one avoid bankruptcy by coming to arrangments with the lenders and suggesting ways of exploiting potential revenue sources)

As Richinspirit says "New Beginnings"  could help. Except they're very busy and it may take some time before they can properly help. Also, they are more combative with the banks than the usual bankruptcy advisor which may or may not be helpful.

Generally, following discussions, banks tend not to reduce the amount of debt. Rather they'll allow a payment-reduced or even payment-free periods and/or extend the whole repayment time. Knocking off a couple of hundred thousand is not likely !

If the lenders ( and that includes the home mortgage lender) are not flexible on rearranging things ,including disposing of usless proeprties , then ,sorry, I think you'll have to consider bankruptcy.


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## Artemis (2 Jan 2012)

Hi Oldnick, Thanks again. 

Any legal opinion on the matter? 

By the way with so much heated debate on this site about the pros & cons of debt forgiveness surely there are some opinions. I do not believe I am alone. There is are many in the similar position who can manage their personal mortgage but that is about it. 

Or dare I ask it another way, (admitting I am obviously biased) how is the tax payer or society best served?


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## RichInSpirit (2 Jan 2012)

I've been thinking about this since.
I know a few crowds that have went into voluntary and involuntarily liquidation. 
Non of the owners lost their family home. They might have lost their business premises but not their homes. 
And a couple of them are actually up and working again, i assume without help from a bank. 
I have a question, is liquidation the same as bankruptcy ??
Also an observation, the above liquidated businesses were all Limited companies as opposed to sole traders. 
Are you a sole trader or limited company ?


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## Artemis (2 Jan 2012)

The investment properties are a commercial loan signed by my wife and I. So it us rather than a limited company. 

I am reasobanly confident that the bank holding the commerical loans cannot get our house, nor would they want it. It is in negative equity and secured with another lender.  

They may seek a judgement mortgage on repayment of the loan (30 years time) or attempt to repoess in 15 years when are kids are 18.  But I also wonder do the banks or us want to be dealing with the current mortgage crisis in 2027?

By the way, I do accept the bank needs to make an example of people and I have no problem with this, otherwise everyone will throw back the keys. A bit like the new teached with the cheeky child to maintain order.

Also, if we did go bankrupt in UK or Ireland, what would happen our house which is in negative equity, two banks rather than one, take a loss, and we get another house paid for by the tax payer. 

It does not make sense and the more I look at it, the more expense on the state, bigger hit for the banks, our pride gets a hammering but I am sure that will recover as I lie in bed till nooon and watch afternoon TV on my Sky box, paid for by the state. 

Its starting to look like the conflict in Northern Ireland, we all blame each other, nobody compromises and in 30 years time, we realise there is a better solution for all concerned, and we all accept we could have behaved differently.


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## Jim2007 (2 Jan 2012)

Artemis said:


> Is there a middle ground between debt forgiveness and bankruptcy?



There may be some ground for negotiation, but you really need to get proper professional advice.  Assuming that your health situation means that you are unlikely to be able to increase or maintain your income, even after the recession, then it might be possible to come to some kind of arrangement with the bank rather than having to go for bankruptcy on the basis that they would come away with more than if that were to happen.  I think your situation is a little bit different to most, so it might be worth a try.

If as you say you want to continue in business then avoiding bankruptcy would be best as it would place a lot of restrictions your ability to operate a business.

It's over 20 years ago since I in worked in this area and I now live in Switzerland, so please seek proper professional advice rather than depend on the opinions of the internet.


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## Steve Thatcher (5 Jan 2012)

*The effect of going bankrupt in england on your family home in Ireland*



Artemis said:


> Also, if we did go bankrupt in UK or Ireland, what would happen our house which is in negative equity, two banks rather than one, take a loss, and we get another house paid for by the tax payer.
> .


 
Hello my name is Steve and I am a professional bankruptcy advisor here in the UK.
You have asked what would happen to your house in the event that you went bankrupt here in the UK. 
In order to go bankrupt in the UK you have to establish your centre of main interest here. I have a posting on how you do that on the site.
There is much interest in the Sean Quinn case at present due to the way in which he atempted to say his main interest was in the North. He has gone about it in a rushed and half baked manner in my opinion and I would not be surprised if his bankruptcy was overturned.
Essentially if you decided to go bankrupt here you would need to live and work here certainly for the greater part of six months and sensibly up to six months before you presented your petition.
As you would have indicated that you main interest was here it would be incompatable with that to try to keep your Irish properties be they investment or your family home. As they are all in negative equity and if H and W went bankrupt they would vest in the official receiver. He would probably hand them back to the banks who were owed money and ask them to sell them and simply inform him of the shortfalls. These would be written off then in the bankruptcy.

That in short is the house position. Please let me know if you want any other questions answered.

Steve


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## Bronte (5 Jan 2012)

You are currently paying 41K in mortgages out of your 65K income, is that correct?  

Have you tried talking to the bank with whom you have the investment properties?  Would they allow you to sell and pay back the negative equity over time.  

One sure think though your health is more important than anything.  

Would you like to do the money makeover thread, you generally get better advice by doing that.  It would also be helpful if you listed each property, with mortgage amount, interest rate and rent etc.  

Well done on still making a go of it after losing your initial business.


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## Artemis (5 Jan 2012)

Our combined gross salary is 65K, so I think our net is about 45, 17K goes on family home mortgage, the balance on running a family of 4, maintaining the investment properties.


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## Bronte (6 Jan 2012)

I misunderstood your first post.  When you say capitalising 2K in Spain, you mean you are defaulting on the interest only mortgage of 4K ?  

Therefore your investment mortgages are now 1.1 million and rising, with property value of 600K and going down.  You really need to post up the value of each and every property with all the details to get proper advice.  From what you've posted I cannot see any way out except bankruptcy.  UK bankruptcy, not Irish bankruptcy which is only for rich people.  Can you transfer your business to the UK?  Would you be better off stopping work and going bankrupt and starting again.  These are the kind of questions you need to be asking.


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