If you declare bankruptcy now do you get to keep your home in the long-term?

Brussels Sprout

I was listening to NewsTalk this morning and they did a piece on the new Bankruptcy legislation. So they went and interviewed a group of different people who were all going to avail of this new law.

They had this one lady on. She's a business woman. Bought her house in 2005 for €280k. Has since remortgaged it with 'top-ups' so that her current mortgage is now €500k. Her business has suffered since the recession so she can no longer afford to replay the €2500 a month mortgage and instead pays €500. So she says "I've made up my mind. I'm going to go bankrupt int he New Year. I'll have all my debts written off and I'll get to keep my home." She then goes on to say "It's my family home, I didn't buy it as an investment".

This lady is taking the piss. If she gets to keep her home then surely this makes a mockery out of the whole legislation and opens the door for all sorts of chancers and charlatans to write-off their foolish boom-time speculations.

Does anyone know for sure what the rules are here because they didn't seem to really know in the NewsTalk studio either.

Villa05

If it was not an investment, why the fcuk did she re mortage

PanaDrama

She gets one year to find alternative accomodation.

If declared bankrupt her assets become the property of the reciever.

Brussels Sprout

PanaDrama wrote: »

She gets one year to find alternative accomodation.

If declared bankrupt her assets become the property of the reciever.

That's what Ivan Yeats was saying (resident bankruptcy expert :rolleyes:) but the lady who was doing the piece with him said that there's a belief out there that this won't actually happen.

mariaalice

Brussels Sprout wrote: »

That's what Ivan Yeats was saying (resident bankruptcy expert :rolleyes:) but the lady who was doing the piece with him said that there's a belief out there that this won't actually happen.

People can believer what they want, however that is not the same as what will actually happens.

Anyone predict calls to Joe Duffy in the next year or so saying they went bankrupt or entered a PIP and didn't fully realise they might loose their house and now have no were to go.

Villa05

New beggings have been spouting this for the last year, that why people believe it

gaius c

Villa05 wrote: »

New beggings have been spouting this for the last year, that why people believe it

They have a slightly different agenda. David Hall has been trying to set himself up as a middleman in the process for a while now and it looks like he has finally succeeded with AIB engaging New Beggings as an intermediary between them and distressed borrowers. Nominally, New Beggings should be representing the borrower but they will be paid by AIB. "Managed opposition" is the technical term for their role I believe.

Geuze

This may help:

https://www.isi.gov.ie/en/ISI

https://www.isi.gov.ie/en/ISI/Pages/New_Bankruptcy

https://www.isi.gov.ie/en/ISI/Bankruptcy_Final_2.0.pdf/Files/Bankruptcy_Final_2.0.pdf

Geuze

How will bankruptcy affect your family home

A family home is the property in which a married couple or civil partners ordinarily reside. The bankrupt person's interest or share in the family home transfers to the Official Assignee as with all other property.
You may not necessarily lose your family home in bankruptcy. You may be able to agree a schedule of mortgage payments with your bank and the Official Assignee, where such payments are within the Reasonable Living Expenses approved by him.

The Official Assignee may not sell the family home without firstly obtaining permission from the High Court. Where the Official Assignee seeks this permission, the High Court will consider the matter having regard to the interests of the creditors and of any spouse or civil partner and dependants of the bankrupt person. If there is equity (i.e. surplus in value of property above amount of mortgage) in the family home the Official Assignee will firstly seek to sell his half share to the spouse or civil partner.

If there is no equity in the family home there is no immediate interest for the Official Assignee to sell. However, if the spouse or civil partner wishes to purchase the interest of the Official Assignee, the Official Assignee in determining the purchase price will have regard to the value of the property, the amount of negative equity, how long the property may remain in negative equity and any other relevant matter.

Scofflaw

Geuze wrote: »

How will bankruptcy affect your family home

A family home is the property in which a married couple or civil partners ordinarily reside. The bankrupt person's interest or share in the family home transfers to the Official Assignee as with all other property.
You may not necessarily lose your family home in bankruptcy. You may be able to agree a schedule of mortgage payments with your bank and the Official Assignee, where such payments are within the Reasonable Living Expenses approved by him.

The Official Assignee may not sell the family home without firstly obtaining permission from the High Court. Where the Official Assignee seeks this permission, the High Court will consider the matter having regard to the interests of the creditors and of any spouse or civil partner and dependants of the bankrupt person. If there is equity (i.e. surplus in value of property above amount of mortgage) in the family home the Official Assignee will firstly seek to sell his half share to the spouse or civil partner.

If there is no equity in the family home there is no immediate interest for the Official Assignee to sell. However, if the spouse or civil partner wishes to purchase the interest of the Official Assignee, the Official Assignee in determining the purchase price will have regard to the value of the property, the amount of negative equity, how long the property may remain in negative equity and any other relevant matter.

Hmm. In this lady's case, her home is clearly going to be a long way underwater, so there is "no immediate interest for the Official Assignee to sell".

I don't see that bankruptcy will change anything for her in respect of the home. At the moment, the concern would be that the bank might decide to repossess the house to sell. If she's bankrupt, the Official Assignee will make exactly the same decision, based on the interests of her main creditor, which sounds like it's the bank.

So it seems to me that what bankruptcy does here is three things -

1) add the extra (?) step of High Court permission for a sale;

2) make it (more?) possible for her partner/spouse (if any) to buy her part of the house;

3) expose the family home to the interests of any other creditors in addition to the bank.

She's speaking as if there's some kind of obvious and simple outcome where the family home is protected in bankruptcy, and that's not the case. The requirement to seek the permission of the High Court may have that effect if there are kids - but is that what she's basing her view on?

Clear as mud.

cordially,
Scofflaw

nesf

If the family home was protected during bankruptcy, eh, why would anyone who wasn't in the limited number of professions where you can't be a bankrupt ever pay off a mortgage?

Scofflaw

nesf wrote: »

If the family home was protected during bankruptcy, eh, why would anyone who wasn't in the limited number of professions where you can't be a bankrupt ever pay off a mortgage?

Sure - just (1) load all your other debts into your mortgage; (2) declare bankruptcy; (3) keep the house; (4) laugh.

cordially,
Scofflaw

Zamboni

Investec and Tesco have both pulled plans to enter the Irish mortgage market.
What would be the point in offering loans when they would have no means of recourse?
This is really embarrassing
Popular opinion and political will are actually preventing the next generation of potential FTBers from getting mortgages.
To add insult to injury they will be paying taxes to keep the previous generation in their houses.

The silence is deafening.

hmmm

Zamboni wrote: »

Popular opinion and political will are actually preventing the next generation of potential FTBers from getting mortgages.

They were warned, but as usual short term thinking by both government, media etc. have us in this position. We can't both allow people not to pay back loans, and at the same time expect banks to be willing to lend at low rates. One or the other has to give.

gaius c

Zamboni wrote: »

Investec and Tesco have both pulled plans to enter the Irish mortgage market.
What would be the point in offering loans when they would have no means of recourse?
This is really embarrassing
Popular opinion and political will are actually preventing the next generation of potential FTBers from getting mortgages.
To add insult to injury they will be paying taxes to keep the previous generation in their houses.

The silence is deafening.

They'll also be paying rent to insolvent landlords not paying their own mortgages. It's like the land war in reverse.

Until folk start writing letters and reminding TD's that renters have votes and they are considerably more numerous than folk in arrears, we won't get anywhere with this.

antoobrien

gaius c wrote: »

They'll also be paying rent to insolvent landlords not paying their own mortgages

The banks are doing something about that much at least, they have started appointing rent collectors to collect from landlords that are not passing on rents that are supposed to be paying mortgages.

matrim

antoobrien wrote: »

The banks are doing something about that much at least, they have started appointing rent collectors to collect from landlords that are not passing on rents that are supposed to be paying mortgages.

How does that work without the co-operation of the landlord?

If some random person turned up at my apartment looking for me to pay them rent instead of my landlord I wouldn't entertain them

gaius c

matrim wrote: »

How does that work without the co-operation of the landlord?

If some random person turned up at my apartment looking for me to pay them rent instead of my landlord I wouldn't entertain them

In fact, Threshold advise you to keeping paying the landlord unless he (or the courts) tell you otherwise in writing.

antoobrien

matrim wrote: »

How does that work without the co-operation of the landlord?

Presumably court order. Given the fact that we're only talking about approx 2,000 mortgages the practice isn't exactly widespread and it seems to be aimed at people like the chancer that brought 10k to court to part pay off arrears, then failed to lodge it in the relevant mortgage account.

matrim wrote: »

If some random person turned up at my apartment looking for me to pay them rent instead of my landlord I wouldn't entertain them

And you'd be right. As gaius c said, I'd be talking to threshold for advice.