Will we lose our home if husband goes bankrupt?
QEven though my husband has a decent salary, he is heavily in debt and is considering bankruptcy. Our home is worth €300,000 but we have a mortgage of €400,000 outstanding on it. I get child benefit income and am worried we could lose our home when my husband becomes bankrupt – is there anything we can do to hold on to our home?
Anne, Rathfarnham, Co Dublin
AWhen your husband becomes bankrupt, his share of the family home transfers to an 'official assignee' – that is, the court official who is appointed to handle your husband's assets and debts.
As your house is in negative equity, the official assignee will have little or no interest in selling your husband's share in your home.
If you and your husband want to keep your home, you will have to negotiate directly with the bank, because it holds the security on it. In your negotiations, you will have to provide the bank with an amount close to €300,000. It won't accept much less because it may be able to sell your home for that amount.
As your husband has no savings, he can't give €300,000 to the bank ... or at least not straight away. However, he is allowed to continue working and may be able to make repayments from his income to the bank over time. It might be interested in this because it would get at least the property current value (plus loan interest) over the course of the loan period. The bank would also avoid the hassle and cost of selling your home.
If the negotiations don't work, the bank will probably sell the property eventually. It would get about €300,000 and would separately claim the remaining balance of €100,000 from the official assignee – but it may get little or nothing. As you are a joint borrower on the loan, you remain exposed to any balance, even after a sale. For that reason, you may have to also consider bankruptcy.
QI can cover my monthly mortgage repayments of €1,700 but can't handle my other debts. I'm advised that personal insolvency won't work for me and bankruptcy appears to be my only option. I have a wife and two children. Although I'm in financial dire straits now, I believe that things could pick up for me in future years. If I go bankrupt and my finances pick up shortly after that, will my future earnings still be used to pay off my debts – and for how long?
Tadhg, Tralee, Co Kerry
AUnder bankruptcy law, the official assignee can only seek part of your income if you have money left over after paying for your share of reasonable living costs and mortgage repayments (or rent).
Let's say the official assignee accepts that your family home is appropriate to your family's circumstances. If you are the only income earner in the family, you will probably be allowed to keep income to cover monthly expenses of about €4,400.
If your monthly income were to increase at any time during the three-year bankruptcy period, it is likely the official assignee would seek the extra income every month (for a period of up to five years).
He would normally adjust what he takes to reflect any subsequent increases or decreases in your income or living expenses during the five years. Also, he cannot get any of your wife's assets or income, unless she also goes bankrupt.
Michael Keenan is a Personal Insolvency Practitioner and a Partner in RSM Farrell Grant Sparks
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