Try to make deal with bank or go bankrupt?!!

[giantfloorpuzzle]

Hi,

I'm looking for advice as at this stage I'm completely confused and am really concerned I will make the wrong decision. I live in Ireland. This is relevant! DH and I bought a house in 2005 as we were expecting ds. This turned out to be terrible timing, nearly the height of the property boom and we paid €240K for a new build two bed terrace.

Since then we have moved out of the area and as we were unable to sell our house we rented it out and we rent a house for us to live in. The mortgage is currently €1,000 a month, the rental income is €750. We were making up the shortfall but now dh is out of work. I am a sahm. We can no longer make up the shortfall, and for quiet a while even needed to use the tenant's rent to allow us to pay our rent and so we did not pass it on to the bank. We spoke to the bank about it right away and after a very short period, when we were €3,000 in arrears they said that we could either sell the house or they would repossess it. We would then be eligible for the shortfall. The house is currently valued at about €140K and we still have €200K on the mortgage. So a 60K shortfall.

I'm not sure what to do. I spoke to a solicitor and she said we could get bankruptcy. It is three years here. I am just about to re-enter uni so now would be a good time as there is a certain living allowance and by the time I left with my PhD we would be out of bankruptcy and free to move on. So then we would have no debt but no house. We would be at zero essentially.

Other than bankruptcy I have looked online and spoken to an estate agent and could probably charge rent of €900 a month instead of €750. Should I try to make a deal with the bank? I really don't know. Is it worth having a house like this? We will not live in the house again as it is too small but I thought perhaps if the rent goes up that it would start to cover the mortgage over time and then eventually when we retire we could sell it and have a lump sum as we don't have a pension and are shortly approaching 40.

I'm overwhelmed by the future consequences of my decision and would really really appreciate some feedback. I'm particularly concerned to find out if there are many long term consequences of bankruptcy, such as visa restrictions etc as I will most likely look for work outside Ireland once I complete my PhD.

Thank you for any replies!!

Hi I did not want to read and run. Im not really sure what the best way forward would be and its late lol ill have a think and post tomorrow night if that is any good for you? xx

Thank you, much appreciated!

Not many people will be able to help as they wont know anything about the Irish laws. Hell most of IReland doesnt undetstand the new bankruptcy rules.
Id do it, inyour shoes. Get rid of it entirely,make a new start, otherwise it will hang over you for ever. Unless youre in Dublin 140k is probably unlikely anyway.

Without knowing the law there it's hard to say, but DH and I filed bankruptcy 7 years ago and it was nothing but a good thing and has had no negative consequences for us. Having said that, we have never got (and never intend to get) credit, although we could.

If you think your DH will be able to find work soon, I would avoid bankruptcy and try to do a deal - simply because bankruptcy can disqualify you from holding various positions (e.g. in politics, and - I think - you can't be a postman) in the future. However, if your DH thinks there's nothing out there for him and he can't make enough soon to cover up your monthly shortfall in income/expenses, take the bankruptcy option. It re-sets to zero, yes, but it at least removes the minus numbers.

Beforehand though, make sure you have a current account at a bank friendly to bankrupts, and remember your credit history will be shot, so trying to move rentals might be problematic.

there are almost no jobs it diqualfies you for under Irish law. Its not really a consideration tbh.

Are you in Northern Ireland or Southern giantfloorpuzzle?

Thanks for the replies! We are in southern Ireland, the house is just outside Dublin city.

If you decide to go bankrupt now you have less to lose than after you have completed your PHD, although the bankruptcy itself lasts for 3 years you can be required to make payments for 5 years.

If you decide to keep the property you can consider using the MARP Process ( Mortgage arrears resolution process) You can google it for more information.

If the MARP Process fails you can consider a personal insolvency arrangement "PIA".

This new debt procedure might help you to secure an appropriate and acceptable resolution to mortgage debt affordability issues.

You do not have to use the Appeals Process under MARP before applying for a PIA. Provided that you have cooperated under this process for six months or longer, you cannot find an acceptable solution to your mortgage debt, or the lender has declared your mortgage to be unsustainable, a Personal Insolvency Practitioner will be able to assist you with a Personal Insolvency Arrangement application.

A Personal Insolvency Practitioner (PIP) can be engaged to make debt proposals to both your unsecured and secured lenders via a PIA. This effectively provides a new opportunity to offer a compromise agreement (of your choosing on this occasion) to the mortgage lender.

The mortgage lender will have the opportunity to vote in favour of accepting or rejecting your Personal Insolvency Arrangement proposals. They will need to weigh up the commercial acceptability of the proposal and the likely consequences should they fail to accept it. For example, some people may choose to become bankrupt if their PIA isn’t accepted. This may well be a commercial outcome that your mortgage lender would prefer to avoid.

Accordingly a PIA might be able to achieve a mortgage debts outcome that the MARP process could not. The Mortgage Arrears Resolution Process is very much in the control of the lender. In certain circumstances the initiation of a Personal Insolvency Arrangement process may move some of that control back towards the borrower.

Thanks for the advice Kelli, we are considered outside of MARP as the mortgage is classes as unsustainable!

Does anyone know if bankruptcy (after the period of actually being bankrupt) has implications for immigration to America? Most of my husbands immediate family live there and we wouldn't want to rule out moving there at some point in the future.

Hi Would you get in contact with MABS? They are dealing with this all the time and have been very helpful....

A couple of things to think about:

1. If the house is jointly owned you will BOTH have to declare bankruptcy or the house becomes split between the assignee and the non bankrupt person
2. It costs money to declare bankruptcy upfront (think 650 each)
3. All your assets become eligible eg car, jewellery etc will be sold. All you get to keep are essentials.
4. For the 3 years you will only keep a minimum agreed amount of income, the rest goes to the bankruptcy, so if your Dh got a job etc, or an inheritance or lotto win or....
5. You need to check if any funding you receive for your phd would be affected, social welfare payments are not affected but most others will be deducted
6. You will need to declare your bankruptcy ever after if looking for money even small amounts from a CU or car finance etc
7. You are currently in rented accommodation, you will need to inform any future landlords of your bankruptcy if they ask for financial info and you may find it difficult to find accommodation
8. I am not sure about entering the US but I do know you cannot leave Ireland without permission from the assignee during the 3 years of bankruptcy

Definitely contact MABS or even citizens advice

Yikes! Sounds very restrictive.

not true.
Cars, jewellery will not be sold unless they are worth well over 6k (and usually they dont add the cost of a necessary car into this figure at all), and its self declared.

The reasonable living expenses are really rather generous, much better than the UK, and a payments order will only be made if their is significant extra income.

You only have to declare your bankruptcy when obtaining credit over 650€ during the bankruptcy term. After discharge, its the creditors due diligence to check the register/your credit score, and they decide on the individual case.

You don't need permission from the OA to leave the country, but you do need to inform them, during the term. If they decide you are trying to evade the jurisdiction or hinder the process, they can arrest you. In practice, not something to worry about.

You do NOT have to inform future landlords about your bankruptcy, they are not giving you credit and there is nothing to say you have to tell them. If they wish to check potential renters on the register, they can.

Its more than 650€, thats the basic fee. You also have affidavit costs, notary costs, stamp duty on forms...its about 1k each at the moment.

Its really not that restrictive, in practice.

Oh, and citizens advice don't give this kind of financial advice, and mabs have a long waiting list and won't advise on bankruptcy. You need to get on to a PIP, solicitor, or the IMHO or New Beginnings, someone like that.
You dont need anyone to do the process for you, you can do it all yourself if you want.

Sorry about the delay in getting back to this thread!

I spoke to New Beginning. We would be able to have €2,700 a month for living expenses, anything above that would go to creditors.

They are charging €3,500 to take us on for bankruptcy! We have not decided yet.