Leaving Job to go Bankrupt - is this fraud?

Thinking of bankruptcy or IVA in UK, advice required

Income details

Net €2,300 pm.


Personal circumstances so we can calculate your reasonable living expenses

Aged 47, single, no children. Working for a financial institution (much to my embarrassment). I run a car as I live 12km from work, study part-time meaning regular trips to Northern Ireland and family all living 100+km away. I have a medical condition which requires a few trips to the doctor / hospital each year. I need to use expensive health supplements, special foods and don’t have any medical insurance. Illness also means life assurance costs €125pm. Management fees for home costs €80pm.


Home loan
Lender: XXXX
Amount outstanding: €255k
Value of home: €80k
Interest rate: €190k is on tracker, €65k is on 4.5%
Monthly repayment: €950 approx interest only, €1450pm approx on full repayment.
Amount in arrears: Not yet in arrears.

In Marp since Jan 2013. Have been on interest only since then to enable me to clear credit card debts, university fees and arrears in property management fees.

Investment property –
Lender: XXXX
Amount outstanding: €125,000
Value of home: €110,000
Interest rate: 1.9% but currently on moratorium until property sold.
Monthly repayment: €0 for time being.
Amount in arrears: None
Monthly rent received: flat vacant, now on market in UK.

Other loans and creditors -

Credit Card - €1,500
University fees - €1,600

Other savings and investments:

None

How important is retaining the family home to you?

I would like to keep it, but will get rid of it if it means I can get rid of the mortgage associated with it.


Any other relevant information

The bank have requested I put the UK property up for sale (which I’ve just done) and take out a loan to cover any shortfall. They have suggested a split mortgage whereby I repay capital and interest on €190k and €65k will be parked for 5 or 10 years. I fear this is just a ploy to keep me in my home until property prices rise enough for them to force me to sell. I really can’t face wasting another 10 years of my life then being left homeless in my late 50’s. I am contemplating a PIA but I’m pretty sure this will be vetoed as I’m only exposed to one institution and this is my employer. I’m also considering either an IVA or bankruptcy in the UK.

What is your preferred realistic outcome?

That I can remain in home but I must be the owner when I retire.

I am in an unsustainable position and the bank have suggested warehousing a quarter of my mortgage for 5 or 10 years. This puts me in a position where the property will almost certainly be repossessed at the end of this period. Rather than go through 10 years of austerity then possession I feel it is better to force the issue myself and get it over and done with asap. If I leave my job voluntarily to make myself bankrupt, would this be considered fraud? Would it be viewed the same way in the UK? Any advice welcome as I cannot continue with this stress indefinitely.

So you have a job? You can afford the repayments?

What is the problem. Pay your mortgage and don't dare throw away a paying job.
You should be expecting to earn more money in 5 years time. I'd certanly imagine myself being promoted or working in a higher paying job.

Yes, I have a job which has had no wage increase since 2007 and a pay cut this year. There will be no increases for the next 5 years. When the mortgage is restructured, I will be able to pay the new lower amount and have €933 a month to live on. This is the best it's ever going to get. When the warehoused portion is un-warehoused in 10 years I'm back to square one and for sure will loose the property. I will be hitting 60 then and it's way too late to start again. If going for broke is inevitable, I have some chance of starting from scratch now even if the prospect terrifies me.

Hi Alex

Small things first. Consider cancelling the life insurance as you are single. This is an expense you don't need and from which you won't benefit. Use the money towards your mortgage.

I have allowed €200 for special circumstances - primarily your healthcare expenses.


Are you sure that your calculations of interest only are correct?
€190k@2% = €3,800 I am guessing 2% ?
€65k@4.5% = €2,925
Total = €6725
or around €600 per month

Could you rent a similar property for €600 per month?

What split have you been offered? Would the monthly repayments be less than the cost of renting something similar?

Why are you selling the UK investment property?
If you are on a cheap tracker, surely the rent received exceeds the interest payable?

This looks like a profitable investment to me?

If they force you to sell it, it should be on condition of writing off any shortfall, if it gets them out of a cheap tracker.

Subject to answers to the above questions - I think you qualify as insolvent.
You should ask a PIP to apply for a PIA for you where the mortgage is reduced to €100k @ SVR. If they veto it, apply for bankruptcy.

I think that they might go for it, as they will get more this way than through a repossession and bankruptcy.

AlexDublin said:

If I leave my job voluntarily to make myself bankrupt, would this be considered fraud? Would it be viewed the same way in the UK?

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You don't need to leave your job to go bankrupt in Ireland. Unless your employment contract contains a clause that you will lose your job if you go bankrupt.

To answer your question, you could quit your job and go bankrupt either here or in the UK. It is a bit of a drastic step, particularally if you go the Irish route. You may also find it hard to get another job thus compounding the situation.

If you want rid of the house, would there not be other options that would allow you keep the job? Propose a voluntary sale of the house-pay a fixed amount to the bank for a few years? But you still need to live somewhere-why not the house for for 5 yrs?

You seem convinced you will loose it - why is that? If it's in negative equity territory in 5yrs time, the bank would not be dying to take if off you if you are paying the mortgage.

I think you really need to think long and hard about the plusses and minuses of what you are thinking. Can you revew your outgoings?

AlexDublin. As you are single would you consider taking in one or two people under the rent a room scheme where you can get up to €10,000.00 tax free. You probably would not get this amount but you could put whatever you get towards the mortgage along with what you are paying. I am just putting this to you as another suggestion. I know it is not ideal but sometimes you have to do things in life that are not to your liking. Maybe it is not a practicable idea.

Hi Brendan, thanks for your reply. I was advised by the bank when I took out the mortgage, I needed term assurance. I didn’t question this as I thought it was a requirement. I will have a look at mortgage protection only to see if I can cut this cost down.

I’m selling the UK property as the bank will not entertain any restructure on my main mortgage until this is done. It has been on interest only for 5 yrs (commercial rate) but this was reduced when I entered MARPS. I think this may have been a mistake on their part but I didn’t want to query it. I’m now on a moratorium for 3 months until it’s sold. Their argument about selling it is that no capital is being repaid, and it’s in NE. I’m not too worried about losing this as I’ve only been breaking even after the endless repairs and fees and it’ll be one less noose around my neck. I can only hope the shortfall is not enormous.

With my flat in Dublin, I’ve been on interest + a bit for the past while (not interest only as I said in earlier post, sorry) to enable me to clear other debts, which I’ve almost done. This arrangement is only until the end of the year, at which point they hope the UK one is sold and then they can finalise a restructure. They haven’t offered me anything definite but have suggested warehousing 65k of the 255k mortgage for 5 or 10 years, although no mention of what happens then.

I ’ve considered a PIA and this is my preferred route, but as I’m only exposed to one lender (who is also my employer) are they likely to accept this?

@ Luternau………. I’m pretty sure I’ll lose the flat as I work with these people and they are not interested in anything other than their own gain. If they park 65k and I repay half the remaining 190k in 10 years, I’ll then be left with a new mortgage of 150k to be repaid over the following 10 years. I’ve had no wage increase in 6 years, a pay cut this year and advised there will be no increases for the next 5, so I will be back in an unsustainable position. A forced sale at that point would mean limited losses for the bank. They’re not in this to do me any favours.

@ Dermot….. yes I have considered this. I’ve done it in the past but it’s very difficult as it’s a small apartment and the area is not great. I will re-advertise and see how it goes. I might consider renting the whole place out but tax implications might make it a waste of time.

Thanks for your advice and sorry for the long post.

AlexDublin said:

Hi Brendan, thanks for your reply. I was advised by the bank when I took out the mortgage, I needed term assurance. I didn’t question this as I thought it was a requirement. I will have a look at mortgage protection only to see if I can cut this cost down.

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Hi Alex - mortgage protection is a form of term assurance. It is obligatory to take it out. At the very least, make sure that the sum assured is not more than the mortgage balance. The lender won't want you to cancel it and may insist on you keeping it, but I am not sure that you should.

I’m not too worried about losing this as I’ve only been breaking even after the endless repairs and fees and it’ll be one less noose around my neck.

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Fair enough, but if you are moving the noose to be secured on your own home, it might not be much of a saving.

They haven’t offered me anything definite but have suggested warehousing 65k of the 255k mortgage for 5 or 10 years, although no mention of what happens then.

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It's better than nothing, but a PIA, or if vetoed, bankruptcy might be a better option for you. You can't apply for bankruptcy unless a PIA has been rejected.

Step 1 - apply for a favourable PIA
If they reject, it tell them you are going to apply for bankruptcy, so therefore you will be putting your home on the market yourself first. Try to sell your home, so that you will only have unsecured debt.
Step 2 - apply for a 3 year DSA - They are less likely to veto it, than a PIA.
Step 3 - apply for bankruptcy

Alex,

Have you realistically thought about you prospects of finding a new position after you follow your proposed course of action?

As I understand it you are:
- heading for 50
- have serious health issues
- a banking background
I don't see any of that putting you on the top of any employer's list of candidates... In fact I'd concerned that you may well find yourself among the long term unemployed and that may well mean that you may not be as well able to look after yourself as you are now.

Hi Brendan,

Thanks for the straight forward advice. It's along the lines of what I've been thinking. I'll just have to wait and see what their final solution is once the UK prop is sold. If the 10 year split is their only offer, I'll force the issue by applying for a PIA. Thanks again.

@ Jim2007. Yes I have. It's not what I want and bad as it seems, it's infinitely better than being in the same boat in 10 years time and homeless to boot. Health shouldn't be too much of an issue once I can afford the supplements. I've only been an "accidental" bank worker since 2005, I have experience in different areas and I've 8 months to go to get a degree. I'm not writing myself off just yet! The real problem will be explaining to the rest of humanity how I ended up in such a dreadful business!

Hi Brendan,

Thanks for the straight forward advice. It's along the lines of what I've been thinking. I'll just have to wait and see what their final solution is once the UK prop is sold. If the 10 year split is their only offer, I'll force the issue by applying for a PIA. Thanks again.

@ Jim2007. Yes I have. It's not what I want and bad as it seems, it's infinitely better than being in the same boat in 10 years time and homeless to boot. Health shouldn't be too much of an issue once I can afford the supplements. I've only been an "accidental" bank worker since 2005, I have experience in different areas and I've 8 months to go to get a degree. I'm not writing myself off just yet! The real problem will be explaining to the rest of humanity how I ended up in such a dreadful business!