So, I bought unwisely in the boom ...

daingeanrob

as the thread title says, i bought a house during the boom, €265000 for a four bed detatched house in offaly, i can currently afford the mortgage, i am lucky that me and my wife are still working but there is a catch. i had to move to sligo to keep working and my wife (who is still working) moved with me.

moving to sligo now means our family home is 100 miles away so we rent in sligo. i am originally from sligo so am happy to be in my home town but our situation was recently complimented by the birth of our baby daugther. i now would obviously like to sell the house in offaly and buy in sligo but the shortfall would be too great for us to afford. i feel a bit stuck in limbo, we both work, pay tax, and now like alot of other people are going nowhere. our house is a noose around our neck reventing us from having any holiday or disposable income.

not sure if many people are in the same boat as me but has anyone any advice? is bankruptcy worth exploring? can dept be wrote of if we sold? any one any similar experience?

Mr. Loverman

Bankruptcy isn't an option as you are obviously not bankrupt. (Bankruptcy law in Ireland is also complicated and unlike bankruptcy in the UK or US).

The bank won't let you sell the house unless you have enough savings to pay off the loss.

So basically you cannot sell. Sorry.

daingeanrob

but what if i stopped paying the mortgage and they re-possesed, bankruptcy would surely follow?

blah

Yes, but the sale of the house would not cover the balance on the mortgage and the bank would chase you it. And you would never be able to get another mortgage.

rugbyman

while both replies are correct, up to a point ,there are several avenues
Is the house in Offaly rented and if so ,does that income pay all of your sligo rent?

You do not say ,and may not wish to, how much you owe on the house ,.Also ,how much would it fetch today?

Since you and your wife both work,hopefully in secure jobs , your bank MAY consider switching your debt to another house in Sligo. Who knows they may even have one in mind for you!


Regards ,Rugbyman

wild_cat

daingeanrob wrote: »

but what if i stopped paying the mortgage and they re-possesed, bankruptcy would surely follow?

You won't be able to get as much as an over draft for years after though.

You do realise that if everyone done this the country would be in an even worse situation........

Personal responsibility and all of that.

not even wrong

daingeanrob wrote: »

but what if i stopped paying the mortgage and they re-possesed, bankruptcy would surely follow?

even if you did declare bankruptcy it's not a get-out-of-jail-free card you know. You are still looking at severe restrictions on your life for up to 12 years, including having to ask permission to leave the country, the possible loss of the family home, and most of your monthly salary/pension being used to pay off creditors.

http://www.citizensinformation.ie/en/money_and_tax/personal_finance/debt/what_is_bankruptcy.html

i can currently afford the mortgage
...
preventing us from having any holiday or disposable income.

You are not entitled to declare bankruptcy because you're tired of paying your debts and you'd rather spend the money on holidays and eating out. This is what they mean by debt forgiveness -- people like you go on sun holidays, meanwhile the rest of society gets public service cuts and higher taxes.

StillWaters

Bankrupcy in Ireland is not an option for you. There is a market now in bankrupcy tourism to the UK, but in order to avail of this, you must live in the UK for 12 months, and even then, only unsecured debt is covered, not mortgages.

I'm afraid you are far from unique in this problem. Is your rent covering your mortgage, or near enough? Some banks are quitely allowing people to sell houses and owe the shortfall over the course of the mortgage, but this is only in very exceptional cases.

I think you should sit tight if renting the offaly house is not stretching you financially too badly, and continue to rent, and wait and see if there are any national policy solutions offered over the next couple of years.

Dades

StillWaters wrote: »

I think you should sit tight if renting the offaly house is not stretching you financially too badly, and continue to rent, and wait and see if there are any national policy solutions offered over the next couple of years.

I this this makes sense.

There's nothing really you can do anyway, so you might as well wait to see if the government comes up with any reliefs down the line for people in your position.

grizzly

People are talking up debt forgivness. Parhaps you could wait it out?

The_Conductor

grizzly wrote: »

People are talking up debt forgivness. Parhaps you could wait it out?

Its not up to the state to offer this to the public though- it would have to be funded by the EU/IMF and they certainly aren't going to do so.......
The paper mentions a 6 billion figure as sufficient for such a scheme- this is wishful thinking in the extreme- and represents less than 1% of outstanding mortgage debt. I'd love to see where Morgan Kelly is getting his figures from- because where I'm standing they look like they were pulled out of thin air.

Keep in mind- any debt forgiveness that has happened thus far- has been on investment properties and btl mortgages- and has been limited to a few notable lenders such as BOSI/Certus (which as its majority owned by the UK taxpayer- means it was paid for by the taxpayers of another country- but the taxpayer picked up the bill nonetheless. The extent of the concessions they offered struggling Irish mortgage holders living in mortgaged properties- was that on sale of the property, any future action would be limited to the capital deficit, and not any accumulated interest in the interim.......

Totally aside from the moral hazard/prodigal son aspect of a debt forgiveness program- we simply don't have the cash to fund a debt forgiveness scheme. Can you see anyone being happy with the need to pump another 50-80 billion into the Irish banking sector? I certainly cant........

mebird

There won't be any formal debt forgiveness scheme. It can't work.

There is already debt forgiveness on a case by case basis for those who are walking away from the property and are truly bust... but I don't you think OP qualifies.

It works like this...

Mortgage is 265 K, homeowner gets buyer for 165 K. Bank says no way. Homeowner puts a gun to the bank's head, and says ...." take 165K, let me walk and formally write off the rest. Refuse, and I will stay here and won't pay you a penny more because I can't. You will be forced to incur all the legal costs of repossession and sales costs and in the end you will end up with less than the 165K I can get for you right now." Banks goes OK.

This is how debt forgiveness is working right now, on a case by case basis.

However you use this tactic, you will be scrutinised to see if you are being opportunistic or, you are indeed bust with no hope of recovery in the medium term.

ShadowHearth

Right. Suggestion of bacrupcy to a couple, who are bouth employed... Like wtf?

Op. You are not alone with this problem. Just rent out the house, then rent something where's your new job is.

Now food for thought: you work place changed now and you are looking to buy a house in that area. Who says your work place wont switch again in a year or two? Will you be looking for a house to buy again?

The_Conductor

ShadowHearth wrote: »

Op. You are not alone with this problem. Just rent out the house, then rent something where's your new job is.

Big issue- you cannot offset the rental income from house 1 against renting house 2. Your rental income is taxable income, less any allowable deductions. This is an issue that people really need to start hammering home to their elected representatives.

ShadowHearth wrote: »

Now food for thought: you work place changed now and you are looking to buy a house in that area. Who says your work place wont switch again in a year or two? Will you be looking for a house to buy again?

This harps back to the notion that buying a house is somehow a milestone that we all need to aspire to. Its almost unique in an Irish context- there is no other nationality who have the same fixation with property that we have. It used to be the case years ago that you got a job on leaving school or college or university- and that was it. Not anymore it isn't. Yet- we've all allowed ourselves be brainwashed into submitting to the mindset that our parents and grandparents before them- had..........

Unrealistic

StillWaters wrote: »

Bankrupcy in Ireland is not an option for you. There is a market now in bankrupcy tourism to the UK, but in order to avail of this, you must live in the UK for 12 months, and even then, only unsecured debt is covered, not mortgages.

As has already been pointed out a UK bankruptcy is not an option in this case but I think it is a bit more flexible in situations where it does apply in terms of mortgages not being covered. As I understand it the trick is to move to the UK and wait until the bank takes back the mortgaged house in Ireland before applying for bankruptcy in the UK. Once the bank has repossessed the house and sold it at a loss the outstanding balance is unsecured and therefore included in the bankruptcy process.

grizzly

Unrealistic wrote: »

As has already been pointed out a UK bankruptcy is not an option in this case but I think it is a bit more flexible in situations where it does apply in terms of mortgages not being covered. As I understand it the trick is to move to the UK and wait until the bank takes back the mortgaged house in Ireland before applying for bankruptcy in the UK. Once the bank has repossessed the house and sold it at a loss the outstanding balance is unsecured and therefore included in the bankruptcy process.

So you'd probably have to wait 2-3 years until the bank has repossessed and sold the property, then live 12 months on top of that in the UK.

Unrealistic

grizzly wrote: »

So you'd probably have to wait 2-3 years until the bank has repossessed and sold the property, then live 12 months on top of that in the UK.

I don't think it has to take that long. The repossession moratorium only applies where the borrower is 'engaging' with the bank. If instead you make it clear to the bank that you are not going to pay or engage then they can start repossession proceedings without any delay. In that case you could move to the UK and immediately let the bank know you are stopping all payments and have no intention of engaging. Then, once the bank has repossess and the balance is unsecured you can file for bankruptcy in the UK.

The_Conductor

Unrealistic wrote: »

I don't think it has to take that long. The repossession moratorium only applies where the borrower is 'engaging' with the bank. If instead you make it clear to the bank that you are not going to pay or engage then they can start repossession proceedings without any delay. In that case you could move to the UK and immediately let the bank know you are stopping all payments and have no intention of engaging. Then, once the bank has repossess and the balance is unsecured you can file for bankruptcy in the UK.

You are making a presumption that banks start repossession proceedings without delay- they will only do this with investment properties (principally BTL properties), not people's PPRs. This is specifically addressed in the code of conduct agreed earlier this year.

Unrealistic

smccarrick wrote: »

You are making a presumption that banks start repossession proceedings without delay- they will only do this with investment properties (principally BTL properties), not people's PPRs. This is specifically addressed in the code of conduct agreed earlier this year.

Definitely the banks have not shown a track record of going after PPRs but the code of conduct does not prevent them from doing so if you make it very clear you have no intention of repaying. ("The moratorium of 12 months will apply only where the borrower engages with the lender in dealing with arrears and will commence from the date the borrower first goes into arrears.")

Mrs Shuttleworth

Unrealistic wrote: »

grizzly wrote: »

So you'd probably have to wait 2-3 years until the bank has repossessed and sold the property, then live 12 months on top of that in the UK.

I don't think it has to take that long. The repossession moratorium only applies where the borrower is 'engaging' with the bank. If instead you make it clear to the bank that you are not going to pay or engage then they can start repossession proceedings without any delay. In that case you could move to the UK and immediately let the bank know you are stopping all payments and have no intention of engaging. Then, once the bank has repossess and the balance is unsecured you can file for bankruptcy in the UK.

I'm not sure where this myth has arisen that the properties must be repossessed first leaving an unsecured shortfall before British bankruptcy should be applied for. I've seen it on a few message boards now and it's wrong.

Assets vest in the receiver on the date of bankruptcy and it's up to him to sell them to pay any excess equity into the overall pot. There appears to be an anomaly in that if the properties owned by the bankrupt are in negative equity and remain so for three years (as opposed to the 12 month bankruptcy period) that the bankrupt should he wish can buy the houses back for a nominal sum but retake the negative equity with them.

The OP in this thread would not be successful in a bankruptcy petition, as he has not committed an act of bankruptcy; he is paying his way and capable of doing so. It should be limited to those who could pay once but due to misfortune rather than recklessness can no longer do so.

We hear lots about mortgages but very little about unsecured debt in Ireland. The banks are battering people about credit cards, loans etc. and they must know that most people would and did once pay but presently cannot do so. I really wonder how this all will pan out in the long term.