Case study Split mortgage, but under pressure from unsecured creditors

T

TryingHard

Registered User
Messages
17
Hi All,

I have a newish (9months old) split mortgage with AIB. 250k repayment and 135k warehoused. House value 340kish. Repaying agreed 1500 monthly with very little to live on - less than insolvency guidelines.
I have considerable unsecured debts in the region of 60k. Just received 2 Debt Claim notices for approx. 8k and 10k respectively from Crosskerrys on behalf of BoI relating to me and husband. Stamped District court.

I owe this money and don't dispute it but have nothing to offer. They know this and advise their instructions are to proceed to judgement and judgement mortgage.
On reading other thread by poster, Time, I understand it's best not to enter defence / appearance at this stage.

My question is how likely they are to force sale of family home in the circumstances over relatively small amount of debt? In N.E. now but possibly will not be so for long although there is a possible local planning disincentive to potential buyers. I don't wish to sell and there are 23 years remaining on mortgage. I know judgements are not enforcible after 12 years.

Appreciate any insights from those familiar with current banking / legal practice in these cases.
 
No point in entering a defense unless you have a genuine dispute over the amounts claimed. Judgment will be granted in default. Forcing a sale of a PDH on the basis of a JM is theoretically possible but unbelievable complex and expensive. I.e. process of obtaining a well charging order and order for sale would generally preclude most JM holders.
Yes the JM will become statute barred after 12 years. Regard this process as a standard by Crosskerry's (who generally work on a no foal no fee basis for these smaller debts) to try and force some kind of settlement offer from you!!
 
44brendan said:
No point in entering a defense unless you have a genuine dispute over the amounts claimed. Judgment will be granted in default. Forcing a sale of a PDH on the basis of a JM is theroitically possible but unbelievable complex and expensive. I.e. process of obtaining a well charging order and order for sale would generally preclude most JM holders.
Yes the JM will become statute barred after 12 years. Regard this process as a standard by Crosskerry's (who generally work on a no foal no fee basis for these smaller debts) to try and force some kind of settlement offer from you!!
Click to expand...

Thanks so much Brendan. That's very reassuring. Having just obtained some feeling of security in relation to our home from the split, it was worrying to think something like this could scupper us. In a way I would like the judgements all progressed to start the clock ticking on the 12 years if that makes sense?
 
Given your situation you now need to focus on paying your mortgage. I would generally ignore existing other debt as realistically the creditors have no options other than obtaining judgments.
 
44brendan said:
Given your situation you now need to focus on paying your mortgage. I would generally ignore existing other debt as realistically the creditors have no options other than obtaining judgments.
Click to expand...
Yes, that's the plan. We pay the mortgage come hell or high water and just keep telling the others we are sorry but there's nothing left. Can I be reasonably confident that no unsecured creditor would attempt to force a sale for those (relatively) small amounts even if we do return to some measure of positive equity?
 
You should consider a PIA which would retain your split mortgage and would see all of your unsecured debts written off. You have a window of opportunity. A judgment mortgage has to be in place for three months before it is counted as secured debt. There is a chance for you to get in first and obtain a protective certificate with the help of a PIP.
 
Thanks DebtCert. Presumably a PIA would require funds to offer to all creditors. I doubt it would work for us.
 
I don't think a PIA should be so quickly dismissed. There are ways to make it work.

Firstly, the mortgage bank could agree to write down some of the mortgage, converting enough of the negative equity to control the unsecured vote. A PIA of this kind would see a minimal gesture payment made to the unsecured creditors. They are then out of the picture and the mortgage lender gets paid in full with no other payments to distract from prioritising the mortgage.

Another way to achieve the same thing would be for the mortgage bank to agree a reduced payment on the mortgage for a period of time in order to facilitate part-payment of the unsecured debts. At the end of that period (say 3 years), the remaining unsecured debts are formally written off and full mortgage payments resume.

It is in the long term interest of your mortgage lender to have the unsecured loans definitively dealt with. Failure to look at the overall picture and sort out the full indebtedness just makes it more likely that any informal restructuring arrangement will not last.
 
There is only €45k in negative equity and €60k in unsecured debt. AIB would have to write off around €120k of debt to be sure of the PIA going through. That would not be in their interest.

Under the MABS/IBF Protocol, the unsecured bank creditors are supposed to agree to write off unsecured debt to make the secured debt sustainable.

Can you list out the unsecured creditors and the amounts owed.

If 65%(?) are owed to other banks, then they might approve a DSA and write off all the unsecured debt.

Brendan
 
Brendan Burgess said:
There is only €45k in negative equity and €60k in unsecured debt. AIB would have to write off around €120k of debt to be sure of the PIA going through. That would not be in their interest.

Under the MABS/IBF Protocol, the unsecured bank creditors are supposed to agree to write off unsecured debt to make the secured debt sustainable.

Can you list out the unsecured creditors and the amounts owed.

If 65%(?) are owed to other banks, then they might approve a DSA and write off all the unsecured debt.

Brendan
Click to expand...

B of I CC - 10k Debt Claim notice issued Crosskerrys
B of I CC - 8k Debt Claim notice issued Crosskerrys
B of I CC - 5k Ivor Fitzpatrick Follow up statement of income requested.
B of I CC - 4K (Stg) Letters looking for payment N.I. CC
B of I Overdraft - 5K Hugh J Ward "Pre Judgement Letter"
PTSB Term Loan 3.5k (Paid down from 15k)
MBNA 16.5k Phone calls / Letters (not acknowledged) 2 years since last payment
MBNA 11k Phone calls / Letters (not acknowledged) 2 years since last payment

PDH split as per original post. Managing new payments and prioritising this. Term remaining 23 years.
RIP with KBC restructured and arrears capitalised. Accepting rent only less management charges. Property in UK. Bought 100k STG Worth 65k Mortgage outstanding 62k and term remaining 12/13 years.

It can become slightly confusing with B of I using different collection agencies for same customers debt. eg. Term loan outstanding is same amount as one CC and I can forget which is dealing with which.

No payments to unsecured debt for between 18 months and 2 years. Previously spotless credit history for 20+ Years including numerous term loans paid down etc. and 3 house moves. Business failed (husband) and I lost my job. It all became unwieldy and unmanageable and we had accumulated 28k in arrears on PDH so stopped paying all unsecured.

My options I think:

1.)
ASSUMING no unsecured lender moves to execute judgement mortgage and force sale of house which Brendan 44 has stated is very unlikely I could possibly do nothing. Allow or even encourage judgments to be secured (to start clock ticking) and then apply for them to be released after 12 years. I don't see us selling. My concern is if we return to positive equity - we're not that far off at -45k that this would change other parties approach. I'd love to know that Brendan 44's opinion was definite in this circumstance. Having said that I would obviously prefer not to have charges against house.

2.) Get PIA instead to avoid the above but with severely reduced means and the level of debt as above, I'm unsure that there would be enough for even lowish monthly payment offers to creditors.

3.) Offer once off settlement to each via a cash payment from my mother. I REALLY don't want to do this as she is a widow and is nervous about provision for her older years even though she's not too badly off and I already owe her 15k from her SSIA which I borrowed when business trouble began as a short term fix. She is not looking for this money back. If it could be done for 15k I would consider it but this seems low.

4.) Complicating factor: With the split I have the option of paying lump sum off warehouse portion on PDH mortgage before year 5 and to have my payments reduce the outstanding amount by an additional 30%. If I had spare money to offer in the coming years against a PIA, surely it would be strategic to save this towards this lump sum payment to maximise my exit from debt (again assuming no creditor forces a sale). Opposite view is the more I pay down outstanding mortgage the more equity available to creditors with judgements against the property.

IMHO negotiated the split and I've asked for an assessment on the unsecured debt via I think, Grant Thornton. Waiting to hear back.

In the meantime I would be grateful for any informed opinions on my situation.

Thanks!
 
Last edited:
Did IMHO talk to the unsecured creditors?

I would certainly try for a voluntary arrangement or a DSA. The unsecured creditors might agree if they received a payment of 10%.
 
Last edited:
There is no ideal solution here for you. However your options are limited by available funds.
1. You are on an ARA arrangement with your mortgage. Under MARP guidelines and as I'm sure IMHO have advised this, you need to prioritise meeting this payment schedule. The alternative is that you are removed from MARP and risk losing your home. Also under MARP the ARA approved (new repayment schedule) should not be at a level where repayments are such that you are left with income below the insolvency guidelines level. This income level would not be sustainable in the long term and you may need to revisit the payment agreement.
2. You are currently living frugally with no excess funds available to pay creditors. As I said previously a PIA is therefore not appropriate as you are not in a position to meet any monthly level of payments to creditors. The mortgaging bank will not agree to any proposal which involved paying funds to external creditors.
3. You can look at the bankruptcy option. This may be more applicable for your circumstances as the current ARA arrangement means that you are living below insolvency guidelines. Bankruptcy will cater for all your unsecured loans and in addition may allow you to keep your PDH. I'm assuming that this was discussed with IMHO.
Given your circumstances I see no benefit in taking funds from a relation to clear unsecured borrowings. There is virtually no risk of any JM being enforced and it is quite likely that many of the creditors will simply WO the amount due when they see your financial circumstances. Make sure you send them all an income statements and statement of assets when stating your inability to repay.
 
44brendan said:
There is no ideal solution here for you. However your options are limited by available funds.
1. You are on an ARA arrangement with your mortgage. Under MARP guidelines and as I'm sure IMHO have advised this, you need to prioritise meeting this payment schedule. The alternative is that you are removed from MARP and risk losing your home. Also under MARP the ARA approved (new repayment schedule) should not be at a level where repayments are such that you are left with income below the insolvency guidelines level. This income level would not be sustainable in the long term and you may need to revisit the payment agreement.
2. You are currently living frugally with no excess funds available to pay creditors. As I said previously a PIA is therefore not appropriate as you are not in a position to meet any monthly level of payments to creditors. The mortgaging bank will not agree to any proposal which involved paying funds to external creditors.
3. You can look at the bankruptcy option. This may be more applicable for your circumstances as the current ARA arrangement means that you are living below insolvency guidelines. Bankruptcy will cater for all your unsecured loans and in addition may allow you to keep your PDH. I'm assuming that this was discussed with IMHO.
Given your circumstances I see no benefit in taking funds from a relation to clear unsecured borrowings. There is virtually no risk of any JM being enforced and it is quite likely that many of the creditors will simply WO the amount due when they see your financial circumstances. Make sure you send them all an income statements and statement of assets when stating your inability to repay.
Click to expand...

Once again Brendan, thank you. Bankruptcy and unsecured creditors were not discussed with IMHO and just the split negotiated. I'm pretty happy with the split and am optimistic things will improve with time income wise. If as you say there is virtually no risk of a JM being enforced, then I think my best play is to do nothing but keep paying the mortgage.
 
I am struggling to see how he would keep his house in a bankruptcy.

Surely AIB would just take the house and clear most of the mortgage.

Could the Official Assignee leave him with the house and mortgage?

"250k repayment and 135k warehoused. House value 340kish."

This is a very valuable net asset and should not be put at any risk.

Brendan
 
Not necessarily Brendan. There are various options where the PDH could be retained. Jim Stafford is the man I found to be most up to date on the current scenario. This is where it becomes vital to get all current information before making any decision on insolvency. The OA will always where possible work with a solution where the PDH can be retained.
 
Brendan Burgess said:
I am struggling to see how he would keep his house in a bankruptcy. Brendan
Click to expand...

I'm a "she". :)

Brendan Burgess said:
Thanks, I had forgotten that. In fact, I had summarised all the options here:

http://www.askaboutmoney.com/threads/what-happens-a-jointly-owned-family-home-in-bankruptcy.184827/
Click to expand...

Don't think any of the above are relevant to us. The debts are more or less equally spread between us so one going bankrupt and the other buying the remaining share of the PDH from the OA wouldn't work?
 
You must log in or register to reply here.
Back
Top