Key Post Where the bank wants to repossess the bankrupt's home...

[Brendan Burgess]

This thread is about, and only about, situations where all three of the following apply:

• The home is in Negative Equity
• The bank wants to repossess the bankrupt's home
  
• The bankrupt does not consent to the repossession

(This thread is not about cases where there is positive equity as the Official Assignee may wish to realise that equity.
This thread is not about cases where the bank does not want to repossess the family home because the bankrupt or their joint owner is making sufficient payments.
This thread is not about cases where the bankrupt surrenders their home.)

This issue came up twice in the Dublin County Registrar's Court and I found the proceedings very confusing. I asked one of the barristers involved in the case about it afterwards, and he seemed equally confused. So I have clarified it with the Official Assignee's Office.

If the borrower is not making payments on terms acceptable to the lender, there is nothing that the Official Assignee can do to prevent repossession. The Official Assignee will not object to the lender seeking an order for possession, but they won't consent to such an order either.

The bank will issue proceedings for possession in the ordinary way.
If the papers are properly served on the borrowers and all the other paperwork is in order, on the first date in court, there will be an automatic Practice Direction Adjournment. The status of the borrower does not affect this.

On the second appearance in court, the borrower is free to make their case why an order should not be granted.

I can think of a number of grounds which could persuade the Registrar to grant a further adjournment.

• The bankrupt is paying something every month as allowed by the Official Assignee and this is enough to make the mortgage sustainable
  
• The joint owner who is not bankrupt is engaging with the bank and paying as much as they can
  
• It is the family home and they have no alternative accommodation
  
• While they can pay nothing now, they expect their circumstances to improve as the bankrupt may get a job

 

[Brendan Burgess]

Relevant sections of the Bankruptcy Act

136.—(1) On the making of an order of adjudication, a creditor to whom the bankrupt is indebted for any debt provable in bankruptcy shall not have any remedy against the property or person of the bankrupt in respect of the debt apart from his rights under this Act, and he shall not commence any proceedings in respect of such debt unless with the leave of the Court and on such terms as the Court may impose.


(2) This section shall not affect the power of a secured creditor to realise or otherwise deal with his security in the same manner as he would have been entitled to realise or deal with it if this section had not been enacted.

61.—(1) This section applies to every bankruptcy matter and vesting arrangement.
...

(4) Notwithstanding any provision to the contrary contained in subsection (3), no disposition of property of a bankrupt, arranging debtor or person dying insolvent, which comprises a family home within the meaning of the Family Home Protection Act, 1976, shall be made without the prior sanction of the Court, and any disposition made without such sanction shall be void. (An order for possession by the Circuit Court meets this requirement)


(5) On an application by the Official Assignee under this section for an order for the sale of a family home, the Court, notwithstanding anything contained in this or any other enactment, shall have power to order postponement of the sale of the family home having regard to the interests of the creditors and of the spouse and dependants of the bankrupt as well as to all the circumstances of the case.

 

[Stephen Curtis]

That's spot on Brendan.

There is a mis-conception that many people hold that bankruptcy provides some level of protection from repossession. If anything the opposite is correct.

Anybody who is considering bankruptcy and who wants to retain their house has 3 key considerations:
1) What will my lender accept as a restructured payment?
2) Will that restructured payment be acceptable to the Assignee. The Assignee is on the record as saying that he will allow up to 30-40% above market rent as a reasonable accommodation cost. This generally isn't an issue in Dublin but can be problematic outside Dublin.
3) Will the Assignee deem my accommodation to be appropriate - i.e. Mary & Joe living along in a 7 bed house may run into trouble.

My data from earlier in the year (happy to update) shows that actually the majority end up loosing their PDH - 39 out of 50 to April 2015