Financial advice needed re surrendering properties or declaring bankruptcy.

Hi, would greatly appreciate advice on what options we have and what the best advice for our circumstances are. Should my husband surrender all properties or declare bankruptcy. Sould I also surrender if this is the option he is taking. Can we retain our family home. I am very worried about the future and what all of this will involve. How long will judgements last for? Thanks.

Personal and income details
Income self: None
Income history: e.g. I was made redundant in Feb 2011 and have not had any work since. I was receiving 2K net per month in previous employment.
Income partner/spouse: 17K per annum, self employed (huge drop in income over the past few yrs as he is in construction industry)
number of children: 2, ages 4 and 6
Amount of Mortgage Interest Supplement received: None

Home loan
Lender: AIB
Amount outstanding: 428K, 24yrs
Value of home: 230K
Interest rate: Tracker rate, Monthly repayment: on an interest only agreement of €750 per month, normally €1850 per month
Amount in arrears: one payment, we have managed to keep up payments, on an interest only option since Sept 2012 for a one year period, have previously been on interest only option on past so very little paid of capital, purchased our home for 480K plus 36K stamp duty which was funded by re-mortgaging both our previous homes (both of us had our own home separately previous to buying the family home together)


Investment property – Both myself and my husband had separate properties previous to buying our family home togerther:
Myself
Lender: Ulster Bank (previous First Active)
Amount outstanding: 268K, 18yrs 11 mths left on loan
Value of home: 130K
Interest rate: Tracker
Monthly repayment : €425 at current interest rate on an interest only option, full payments would be €1409
Amount in arrears : € 1,847
Monthly rent received : €500
Interest only option ends this month, I have re applied for it and also asked for other options available to me. I asked about extending the term of the loan, they said that is unlikely and I also asked about debt forgiveness for some of the loan but that was also refused.
Husband
6 Properties, 2 with BOS, 2 with AIB and 2 with Ulster Bank. 2 empty 4 rented out.
1 was his home, 5 were bought with a friend who no longer resides in the country.
Value of all six properties: 550K
Amount owed on all properties: €1,635,000K
Arrears: 80K
All of the properties apart from the 2 BOS were on full mortgage repayments as the interest only agreements had ended and were refused when reapplied for. Repayments by far outweighed rent received. He has signed a surrender document for the 2 properties with BOS last week, Ulster Bank have sent out surrender documents but have yet to be signed. AIB recently agreed to interest only on the 2 properties. Husband wants to surrender all 6 properties.

Other loans and creditors
Credit Card – Husband has 14K balance which has now been terminated by MBNA and awaiting whether it will be sold to third party collection.


Other savings and investments
Myself -20K from previous employment in a 30 day deposit account

How important is retaining the family home to you?
Very important to me, I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.


What is your preferred realistic outcome?
We would like to surrender our rental properties so we can concentrate on paying our family home mortgage.

There is no easy or simple solution to this level of unsustainable debt. What you need is a debt settlement arrangement, but this could prove problematic as 65% of borrowers will have to approve it. Given your low level of income, you should seriously consider UK bankruptcy as an option, but you should seek expert advice before making a final decision.

This may seem like a stupid question, but if we go down the route of UK bankruptcy, would we have to give up our family home? If we surrender all properties but the family home how long will the judgement for the difference last? Is it for your lifetime?

I'm not competent enough to comment on UK bankruptcy laws. However, as the PDH is separately mortgaged, with a significant level of negative equity attaching, I would certainly not attemot to exclude it from the bankruptcy. i.e. You will not get a solution where you are allowed to keep the PDH and the neagtive equity is written off. We all have our individual views, but a 430K mortgage against a 230K property is unsustainable and you would be significantly better off having this debt burden off your bank and renting a property. There is going to be no solution according to all Economists and insolvency experts, where debtors are going to have the negative equity in their PDH's written off & be allowed to retain the property.

Thanks for your quick reply. I would not expect the negative equity of our primary home to be written off, as crazy as it sounds I would be willing to accept the debt on it, as hopefully when I am working again we can afford full payments. Maybe it is an emotional decision (children, schools, family etc) but I would be extremly upset to leave the family home. We have kicked this can down the road for too long now so we need to make some final decisions soon! If we surrender our rental properties how long will the judgement for the difference last?

I fully accept what you are saying and note that from a personal level this would be a significant issue in your lives. Obviously decision will need to be made by both of you taking all financial and non-financial considerations into account. In your considerations you should bear the following points in mind:
- UK bankruptcy will require you to establish a UK COMI. This means a relocation to the UK for a minimum period of 6 months. Probably longer. If both of you are gong to be involved in the bankruptcy process both will need to move.
- If you decide to ertain the PDH, you will have a house valued at 230K with a attaching debt of 430K. This is a high price to pay for the "sentiment" value of the property. I.e. You could probably rent a unit in the same locality for circa 1K pm or less.
- No doubt all of this will pass in time and your financial circumstances will improve. However, they will improve a lot quicker without the debt burden attaching to the PDH.

Obviously, take all considerations and advice into account before making a final decision, but having changed house myself a number of times due to work commitments, I can say that the disruption is temporary and we all (including children) settled quickly into the new locations. It's only bricks & mortar as compared to the peace of mind by being debt free!!
Best of luck!

Thanks very much for your advice.