ISI case study - Martin and his buy to let

Home with Monica
The family home has a value of € 300,000 and there is an outstanding mortgage of € 255,000. There is therefore € 45,000 equity in the family home. As Martin’s share of the family home is now vested in the Official Assignee, 50% of the € 45,000 belongs to the Official Assignee.
Monica will have the option to purchase the Official Assignee’s interest in the family home for € 22,500 [50% of the Equity]. The Official Assignee will have to apply to Court to sell this interest to Monica. If Monica is unable to raise the funds immediately she may apply to the Court for a postponement on the order for sale to enable her to raise the finance. The Court will consider the interests of the creditors, and Monica in determining whether to postpone a sale. If Monica cannot purchase the Official Assignee’s interest, the Official Assignee will apply to Court for an order for Sale. For the purposes of this scenario it is assumed Monica is able to raise the € 22,500 and the Official Assignee gets Court approval to sell his interest to Monica.

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BUY-TO-LET PROPERTY The Official Assignee will instruct the tenant to pay the rent directly to him as the rent will form
part of the bankruptcy estate for the benefit of the creditors. The Official Assignee will not pay the mortgage in respect of the property. The lending institution may on foot of its mortgage agreement appoint a receiver to collect the rent and from that time onwards the rent will no longer be paid to the Official Assignee. On the basis that there is no equity in the property and the bank prove the security to the satisfaction of the Official Assignee he will surrender possession to the bank where no receiver has been appointed. For the purposes of this scenario we assume the Bank appoint a receiver, values its security at € 130,000 and claims for the shortfall of € 80,000 in the bankruptcy.

Shortfall: €80,000 -
Dividend paid from sale of equity in house - €7,731
Debt write down: €72,269

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7. MARTIN’S POSITION AFTER MEETING HIS DUTIES AND OBLIGATIONS UNDER BANKRUPTCY

n) The family home is held in Monica’s sole name and Martin pays a contribution to the mortgage going forward.

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