Voluntary Judgement on Mortgage Residual Debt

[carraigrua]

Having run up substantial arrears on mortgages and after a few years of committing to interest only payments, it has been agreed between ourselves (husband and I) and bank that our current situation is unsustainable. I have had salary cuts and my husband has experienced periods of unemployment also.The bank has suggested putting our family home plus 2 of our 3 buy to lets that we own up for sale. There will probably be a residual debt of approximately 500k should we succeed in selling the properties at current market valuations. The bank proposes that we also move into our third buy to let with a new mortgage. However, the bank also proposes that we should agree to a 'voluntary judgement' on the residual debts that will arise from the 3 house sales. They have intimated that this judgement will probably not be registered nor will we likely have to ever agree to a payment schedule on these debts! This sounds too good to be true - however, are we, in accepting this 'deal', leaving ourselves very vulnerable to future bank policy change?? And what exactly is a 'voluntary judgement'? If we do take the route proposed, what happens should we inherit money from family in the future? Are existing judgements 'discovered' when a will is executed? I cannot find the answers to these questions online and we will have to make a decision really soon! Can anybody help please?

 

[Brendan Burgess]

You have a very interesting queston and you should complete the Case Study format to get comprehensive opinions.

http://www.askaboutmoney.com/showthread.php?t=170704

Has the bank provided you with a document setting out the agreement or is it oral?

What would the final position be after the three sales? House value and mortgage?

A Personal Insolvency Arrangement may well be suited for you. And you may be able to keep your family home, although it will be mortgaged.

As you seem to have a bank talking to you and exploring options, it's possible that they might do some voluntary arrangement whereby you sell all properties and have the shortfall written off. That should be the opening point in your negotations.

If you have a judgment against you, or if you owe money, and you get an inheritance subsequently, you would be legally and morally obliged to repay the debt. That is why you might look for some finality on it now.

I haven't heard of a voluntary judgment. I presume they mean that they will apply for a judgement and you won't object to it. Or they just might mean that you agree that you owe the money and that they won't bother collecting it. Not sure why they would go to the legal costs of getting a judgement.

 

[Bronte]

They have intimated that this judgement will probably not be registered nor will we likely have to ever agree to a payment schedule on these debts! This sounds too good to be true - ?

I've been told the very same by a professional in Ireland. That they are allowing people to sell, that they 'say' you are liable for the shortfall, but that they in essence do nothing about it.

Whether in the future they will come after you if things improve I cannot answer. After the bubble collapse in the UK in the eighties the banks did chase people a few years later and caught them when they had got good jobs/assets/inheritances. You have to be careful about the statute of limitations and acquire nothing is my advice until then, but consult a solicitor for concrete advise on the time limits on banks chasing you.

 

[frostie]

I've been told the very same by a professional in Ireland. That they are allowing people to sell, that they 'say' you are liable for the shortfall, but that they in essence do nothing about it.

Whether in the future they will come after you if things improve I cannot answer. After the bubble collapse in the UK in the eighties the banks did chase people a few years later and caught them when they had got good jobs/assets/inheritances. You have to be careful about the statute of limitations and acquire nothing is my advice until then, but consult a solicitor for concrete advise on the time limits on banks chasing you.

If the question is not asked, it will not be answered. Ask for the sale of the property in full and final settlement of the debt. But get the agreement. I'm aware of many situations where it was advised by the person's solicitor to sell, and then deal with the aftermath later, hoping statute will pass by. This is crazy. If they have said they 'probably' wont do anything about it, put their money where their mouth is.

If they believe they will never have to agree a repayment schedule, why delay the inevitable. Sign an agreement, and both parties can move on. If they are the sole creditor, there's no need for this to go through the Insolvency Act.

 

[Commercial]

What I presume the mean by a voluntary judgment Ja that the park your debt on a 0% interest rate for a fixed period. No one is aware of it bar you and the bank and the judgment is not registered.
It is to "protect" the bank in case you come into a large inheritance or win the lotto.
They appear to be working with you as you seem to be cooperative.