# Bankrupt - Can I afford to go bust?



## Gyroscope (23 Sep 2013)

I'm looking for some advice or even pointers.

In 2008 my business when to the wall leaving me a personal guarantee of 80k, I have a house which has a mortgage of 380k and is worth about 200k,  a credit card of 5k. All in my name only.

A few years ago I got married - my wife has her own house (with big enough mortgage) so I rented mine to cover the mortgage interest only.

I pick up part time work from time to time and I've been trying to get a business off the ground with a little success - I made about 10k this year

The house is unsustainable in the long term and I feel the pressure of all of this is really starting to take it's toll on me. I'm 55 and time is running out for a fresh start.

If I go to into insolvency will they regard my wife's income as part of mine and take everything I earn to cover debt. (I pay my own way in the home and have little to spend on anything else but if they take that too it will add even more strain)

If I go bankrupt in the UK, is it expensive for solicitors fees and where's good to go. I've read a lot of comments on Belfast being harder and Swansea being easier.

Has anyone been through the process that can give me some pointers so I can see how I can afford to go bankrupt.


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## Brendan Burgess (23 Sep 2013)

Your wife's affairs are separate from yours, assuming she has not guaranteed your debt or is not jointly named on any of the debt. 

You should probably set out the information in this format: 

Standard Format for unsustainable mortgage Case Studies

I suspect that the best option would be to sell the investment property. You will then be left with unsecured debt which you should be able to deal with over a short period without having to leave the country.


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## Gyroscope (23 Sep 2013)

Thanks Brendan - I set it out below.


What do you mean by deal with the debt over a shorter period?

*Income details*
  10,000 Self employed, 
  My wife has approx. 35,000 employed
  One Child at home
*Personal circumstances so we can calculate your reasonable living expenses*
*We both need cars*
*1 Child*
*Home loan **- in my wife’s name only*
*160,000 outstanding*
*Worth 160,000*
*1,200€ per month mortgage*
*Investment property – *In my name only 
Lender:  ICS
Amount outstanding: 380,000
Value of home: 200,000
Interest rate: 2.25
Monthly repayment  2200
Amount in arrears  6000
Monthly rent received 1100
*Other loans and creditors - *delete those which don't apply to you
Credit Card – 4000
Credit Card - 200 
Term loan Amount 80k – Personal Guarantee on Business Loan
*No Savings etc*
*How important is retaining the family home to you?*
*When my wife and I met we both had homes – hence teh house we live is in her name only and the investment property (which was where I lived previously) is in my name only*
*ALL DEBTS ARE IN MY NAME ONLY*


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## 44brendan (23 Sep 2013)

You are insolvent, with a high level of debts and minimal level of income. Luckily your wife is not liable for any of the debt, so any action re insolvency will be in your name only. Selling the investment property is the only realistic alternative. Your income is so low that you have no real capacity to service any residual debt. Bankruptcy is unlikely to be an appropriate option, given your low income and lack of assets. You would be well advised to seek out a good insolvency practitioner and get him to put together a solution that best suits your circumstances. A PIP will cost money up front but would be worth the investment, provided that you can meet some level of small monthly payments to your creditors!


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## Gyroscope (23 Sep 2013)

44brendan said:


> You would be well advised to seek out a good insolvency practitioner and get him to put together a solution that best suits your circumstances. A PIP will cost money up front but would be worth the investment, provided that you can meet some level of small monthly payments to your creditors!



Thanks for your response 

Isn't there a minimum level of income I'm required to have before I can go down the insolvency route?
Won't that route prolong the process where as if I go to the uk I could get through it quicker?


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## 44brendan (23 Sep 2013)

UK route will have substantial costs & may not suit your situation. Get professional advice before making any decision.


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## Dr.Debt (23 Sep 2013)

You need to weigh up the costs between the two options that you are considering.

1) Bankruptcy UK.
You will need to reside in the UK for a minimum 17/ 18 months
You will have the cost of traveling there, getting accomodation, establishing a COMI, paying the UK court for the bankruptcy and paying a lawyer if you intend to use one. If you have any income stream between the time you declare bankruptcy and the time you are discharged from bankruptcy, there is a chance that you will need to pay a portion of your income to the Official Receiver for up to three years. You will lose any assets in the process and all your debts will be wiped out

2) Personal Insolvency Route Ireland. 
This route might not work very well given that your income is low and you have very little to offer your creditors. If you can come up with a small amount of money to pay your creditors, I believe they will accept it in preference to you going bankrupt in the UK. The cost of going this route is likely to be 3000 to 4000.

Its really a case of what fits your circumstances best


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## Gyroscope (23 Sep 2013)

Dr.Debt said:


> YIf you can come up with a small amount of money to pay your creditors, I believe they will accept it in preference to you going bankrupt in the UK. The cost of going this route is likely to be 3000 to 4000.
> 
> Its really a case of what fits your circumstances best



Thanks for the reply.

When you say a small amount of money are you referring to a lump sum or an increase in my earnings.

I estimate my debts will be in the region of 300K by the time it's all sorted - I wouldn't be able to come up with much except what my family might loan me - 10k maybe.


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## Dr.Debt (23 Sep 2013)

Yes, I was mainly talking about a lump sum but an increase in your income could achieve a similar outcome. In fact a small lump sum together with a small monthly contribution from your income might be a third option. I would urge you to explore your options with a Personal Insolvency Practitioner

Just remember that your creditors will not want you to go the bankruptcy route. If your property is sold by the court appointed Official Receiver, I believe that the court will take around 15% in fees from that alone (and probably as much again for trustee fees) and its unlikely that the OR will be successful in getting the best price for the property either. The bank will much prefer an orderly sale of the property as part of a PIA.


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## Bronte (24 Sep 2013)

How about a completely different approach to this. Leaving out the costs hassle and stress of bankruptcy UK or Irish PIA. 

Have you asked your bank can you sell? Have you told your credit card company and term loan people that you have no income (10K doesn't count) and that you will not be paying them anymore. They may well write off the debt, that's what sensible companies are doing, but you'll have to prove you're broke. 

If the bank don't play ball on the sale, and I'd be putting it in such a way as that you'll do your best to keep it in a good condition in order to get the best price etc. You need to negotiate with them. And probably have to sign a confidentiality agreement. I'm amazed they haven't suggested this to you already as you're not capable of paying the mortgage in full. What is the actual situation between you and the bank?

In relation to your specific question on UK bankruptcy, Belfast is a no go for you, as you are married, but any large metropolis in the UK should be fine. Please look at all the threads on bankruptcy on here. And more particularly the advice of poster Steve Thatcher who is a UK based solicitor specialising in Irish bankrupts. His fees are about 4/5K as far as I can tell. The big advantage to UK bankruptcy, and it's really a big one, is that you know in 18 months you're all done and dusted and can start again. That's what the UK is aiming for, entrepreneurs like you who have some experience and want to get bank on their feet, unlike the new insolvency regime in Ireland which seems to want to tightly money manage and punish people for the next 6 years or 20 in some cases.


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## Dr.Debt (24 Sep 2013)

I think there's two very typical misconceptions in Bronte's post which are causing great confusion for many people at the moment.

A UK bankruptcy does not always mean that you are done and dusted after 18 months. If there is an income payments order against you then that eighteen months can become up to 56 months.

An Irish PIA does not need to last for 6 years. If the deal being done is based on a lump sum, then it can be wrapped up within one year.

Also, In this case its pointless to recommend to the OP to start negotiations with the bank. A carefully constructed PIA with close attention to the voting permutations will ensure that all the unsecured debt is written off in one go. Trying to reach agreement with each of the unsecured creditors individually will be a huge undertaking.

Also I would like to know who all these banks are that are writing off unsecured debt because you're broke. What happens in practice is that the bank will secure a judgment (within six years) against the debtor and then take up to 12 years to enforce it. The debtor will be on the hook for all that time. The bank may indeed write off the money in its own books but that doesnt prevent it from chasing the money for the next twelve years. The writing off of debt in a creditors books and chasing debt are not always co-related


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## Bronte (24 Sep 2013)

Why would the UK order an income payments order against someone with a very low or zero income. The OP's current income is 10K, this will presumably cease if he were to go to the UK. We know of only one case where there was an income payments order, and that is Ivan Yates, who has a well documented pension and now a high profile job.

In theory PIA's don't have to last 6 years, but all the case studies on the ISI website are for 6 years as far as I know. They way they speak about it, they seem to expect them to last 6 years. We'll see how this pans out and whether people will be out in 1 year. And you mention a lump sum, where is the OP going to get a lump sum. How does the lump sum work?

What if the voting permutations don't work, and the bank doesn't agree and has the percentage on their side. Please explain how you think you can get the percentages right.

I agree with you there are no guarantees, but the OP, if he does negotiation with the bank should try and get an agreement that 'written off' means written off.  If not then he has the threat of the nuclear option of UK bankrupcty, and the non cooperation on sale.  He has to use whatever he has to negotiate.  And we have heard Irish bankers say there will be write offs.


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## Dr.Debt (24 Sep 2013)

If he has no income there will be no payment order however the OP has some earnings at the moment and he has mentioned that he needs to pay his own way. I think its incorrect to make assumptions about the OPs intentions and about his future earnings. Its better to give the full facts and let him apply these to his own situation.

Anybody who has an income in bankruptcy over and above what is required to sustain themselves can expect to have an IPO placed on them. Its pretty standard


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## 44brendan (24 Sep 2013)

In my experience (banking and business) I would tend to lean more towards Bronte than Dr Debt on the issue of long term risk for the OP.
Yes it is true that a creditor/bank can take judgement proceedings, which in turn allow them up to 12 years to take further action. However, having worked in 3 different banks, once a loan is "written off" unless there is a large probability that the debtor's financial circumstances will change it is not pursued over the longer term. Neither banks nor creditors have the resources to follow up on historical bad debts. It would not be cost effective to attempt to assess the financial circumstances on an ongoing basis of historic write-offs. I have known an occasional circumstances where a significant bad debt was W/O and some years later that individual made news headlines in respect of a windfall, but this would be an exception. In general if the Bank writes off the debt it will not be pursued subsequently.


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## Gyroscope (24 Sep 2013)

Thank you both for your insights.

A few questions were asked - I've tried to answer as best as I can.

I have been paying the mortgage on interest only ( I rented the property) - Initially the bank asked me to sell the property (by phone) but when the letter arrived they asked for a increase in the mortgage and an agreement period for a year. That's where I'm at now. The offer of selling disappeared ( I haven't ask them about it since )

I'm pretty much unemployable - at 55 for the skill set I have I'd find it hard to get work. I've always worked for myself.
I started a business last year - it doesn't ever have much of a financial future however it could keep me going (perhaps make 20K per year in time). To do it I have to buy equipment. So far this year I tuned over around 16k and about 8 went into buying vehicles (I need three for what I do) - I need to spend more over the long term as I'm using junkers which spend more time broken down than running) but that's where I am now. I made 2k working part-time in a PAYE job.

I don't want to leave my wife and go to the UK - I really don't! I'd be miserable but if that's what I have to do!
I don't want to spend the next couple of years trying to get a business running only for the bank to say - you're not making enough to pay us but you own 15k work of vehicles so we'll have that instead. Then I'm back to square one, getting close to 60 and no income again.

The business loan debt has been lodged in the high court for a judgement almost a year ago but nothing has happened since. The credit card - it's only since the bank asked to increase the mortgage that I stopped paying the CC

My wife could just about afford to keep me - and she would but I'd be taking money that should be going to her child and I couldn't live with that  - I have to pay my way.

My wife said she would get a term loan so I could get a lump sum together. It wouldn't be much as she's got a big enough mortgage and her pays been cut a lot.


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## Dr.Debt (24 Sep 2013)

Hi Bronte

You ask about how to get the voting right.  In this case the PIP will need to get the mortgage lender to agree to reclassify some of the secured debt to become unsecured debt. This can be done up to the extent of the negative equity in the property. If the lender agrees to reclassify some of the debt then the arrangement can be passed at voting stage and it wont matter what the other unsecured creditors do. For example if the mortgage holder reclassifies 120K to be unsecured debt, then the personal guarantee holder will be outvoted in the unsecured debt section (provided of course that these two lenders are not one and the same)

44Brendan, I understand what you say when you tell us that banks in the past have not bothered to reinforce old judgments. In my most recent experiences we are now in a whole different ball game from before. From informal discussions with very senior bankers, my impression is that it will play out very differently in the future.It is now worth it for the banks to monitor all judgments very closely and to enforce them as much as possible. Its not feasible for the banks to write off such vast sums and then not to bother looking in the rear view mirror. My guess is that they will continue to get judgments and seek to enforce them for as long as they possibly can. Only time will tell which one of us is right.


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## Bronte (24 Sep 2013)

Dr.Debt said:


> Anybody who has an income in bankruptcy over and above what is required to sustain themselves can expect to have an IPO placed on them. Its pretty standard


 
And that is why anyone going to the UK is advised to only have enough income to cover the essentials, precisely so that no order can be made.

It will be interesting how you are going to get banks to agree to reclassify the secured debt as unsecured, I presume that is your plan at the moment with your clients.

I think you're calling it right on the future re banks coming back after people whose debt they have written off.  In the past as 44brendan stated it wasn't worth their while but we've a whole new ball game now with the amount of people that will have to be processed.  That would seem to indicate to me that the banks will create teams in the future to see how people are getting on and if they open a business or inherit the banks may go after that.  Which is why it's very important that if one is dealing with a bank, that one gets it in writing that this is the end of the matter.


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## Bronte (24 Sep 2013)

Gyroscope said:


> The offer of selling disappeared ( I haven't ask them about it since )
> 
> I started a business last year
> 
> ...


 
A few things. 

It's really commendable that you've started a new business. You are exactly what Ireland needs and it precisely because of people like you that Ireland has a chance of getting out of the current mess of unemployment and stagnation. 

Yes it would be really hard to do the UK route, so try all other options first. Some people think hopping over to the UK is easy, I live abroad and the worse year is always the first year. But if that option gives you finality then you have to put it on the table as an option. 

I would not mention the option of the loan to anybody. Not the advisor, nor the banks. They'll all tell you to take it. The only situation I'd say go for it is if it actually would sort something out. But all I could envision happening is the bank taking it, writing it off one of your arrears and the debt mounting again, and an advisor will say take it so you can pay them. And the even worse downside is not only you, but now your wife will also be in debt and she's just about doing ok, and trying to do the right thing by you.

What do you mean the mortgage increased?  Just because the bank hasn't said you can sell, doesn't mean they are not agreeable.  Would you be up to having a meeting with them to see what options they will give you.  Meetings can sometimes progress things a lot more than letters.


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## 44brendan (24 Sep 2013)

The difficulty here is that the OP has a problem and is looking for a solution that will resolve this problem rather than postone it. He has a minimal amount of income, with little opportunity of increasing this to a level where he can service any element of his substantial debts. The PIA route is not practical as he has no capacity to make any realistic level of ongoing payments. UK bankruptcy is an option but will involve incurring high costs and will also eliminate his current earnings capacity. Irish bankruptcy is also an option. However I have yet to see how the new legislation will work in practise and what the associated costs are. Perhaps DR Debt has a better view on this.
The final option is to play hardball the creditors. i.e. complete a full SOA and income statement. Approach all of the creditors with this and explain that you are both insolvent and effectively have no net earnings other than the minimum amount required to meet your living expenses. Offer to assist the bank in selling the investment property (you can offer to do this on the basis that the balance of the debt will be written off or postponed!!). You will meet some resistance and will not get the full closure that bankruptcy will offer. There is a risk that the Banks will progress to jusgement, but this will be worth nothing to them unless your financial circumstances increase in the medium term. This is the advice I would give. Yes there is stll some risk that the banks could pursue you in time, if your financial circumstances change, but unless you acquire significant assets in the next few years (not counting the few cars used for your business) then the banks have no option but to sit on their judgements!!


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## Bronte (24 Sep 2013)

44brendan said:


> The PIA route is not practical as he has no capacity to make any realistic level of ongoing payments.


 
So why did Dr. Debt say he could be out of a PIA in a year?


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## Dr.Debt (24 Sep 2013)

Yes that's the point. A PIA does not have to last six years. Its a maximum of six years however if the debtor has no capacity to make monthly payments for six years, he can alternatively offer a lump sum or "short PIA" which will last only a few months. The key thing to remember is that the creditors must agree to the arrangement that is being proposed "short" or "long". 

If you were a bank would you prefer to get a small lump sum and to see the property being sold in an orderly fashion through a PIA or would you prefer the Debtor to take the nuclear option through a UK bankruptcy where it may get nothing


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## Bronte (24 Sep 2013)

Dr.Debt said:


> however if the debtor has no capacity to make monthly payments for six years, he can alternatively offer a lump sum or "short PIA" which will last only a few months.


 
What if there's no lump sum or no income?


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## Dr.Debt (24 Sep 2013)

Yes that's the big question. How do we help the people who have noting at all to give. Every PIP in the country is coming up against this hurdle on a daily basis and trying to develop strategies to deal with it...........


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## 44brendan (24 Sep 2013)

Good point and one that was raised through my earlier post. i.e. bankruptcy is the only realistic option where an insolvent debtor with minimal income can achieve a clean bill of health and start again. However bankruptcy (whether in the UK or Ireland) tends to be an expensive process and is not suitable for these cases. There is no solution for these people that will totally give them a release from debt AFAIK.


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## Gyroscope (24 Sep 2013)

Thank you all for the input - it really is great to see the opposing opinions as it is making me aware of the alternatives.

The only way I can see that I can play hard ball is if I'm prepared to take the nuclear option if it fails. I guess that something I'll have to build up to but at present I haven't been able to get a job in Ireland - If I go to the UK I suspect it will be even harder.

What would be the base level at which an income would be suitable for PIA in this sort of situation?

Is  there a possibility that the banks could take the business assets and  essentially take away my income because there isn't sufficient amount to  warrant a PIA?


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## 44brendan (24 Sep 2013)

A PIA is only suitable for thos who can meet at least the cost of the PIP plus some level of monthly payments towards their debt. There is no stated minimum income, but at 10K pa you are unlikely to be ina position to meet any realistic monthly repayment.
Banks cannot take assets from you. On foot of a judgement they can get the Sheriff to call out an seize goods, but you are entitled to keep the tools of your trade. Effectively if these vehicles are essential to your business, it is not likely that the sheriff will seize them.


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## Gyroscope (24 Sep 2013)

Thanks Brendan - would 20K do it?  As I would hope to get closer to that in a year or so.


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