Family in debt and not sure what to do

LegacyUser

I'm sure a lot of you are in similar situations given the climate, but I need to discuss this.

My Dad invested in a lot of property during the boom time, and there was no talking him out of it. He was pretty much like a gambler who was given a tip on a horse, and didn't believe it could lose. There was absolutely no telling him that house prices could ever go down, ever.

When I was 18 (22 now) he talked my sister and I into buying a house and renting it to pay the mortgage. This was something that I really didn't want to do, which he took extreme offence to. I didn't want to be tied down to something like that so young, and to me it was a gamble. He did say that if the prices went down he'd take responsibility for the rest of the mortgage, so I stupidly conceded in the end.

My parents are very reluctant to discuss their financial situation with me, and won't even tell me how much property they have, but I've basically gathered that they have about 20 properties bought over the last 15 years and wouldn't break even if they sold them all. The mortgages are currently on interest-only loans but will not be much longer. The rent from the houses doesn't covers the mortgages.

On top of all this the family business is going under. My parents are a few years away from retirement age, and it kills me to see my dad still bursting his arse for a business that's making a loss.

Both my parents have worked very hard to see that me and my siblings had a good upbringing, and I feel as though the onus is on me to come up with enough money to provide them with a decent retirement in the next 5 years or so.

Short of coming up with some ingenious money making scheme (which to be honest, won't happen), I can only see myself spending the next 20 years or so working to support them. To be honest, I feel a bit bitter, as though I'm left to pick up the debts of the risks my dad tooks, but I love them all the same.

Any advice appreciated.

kmick

You neither have to take on debts or equity its always your choice. As far as I can see the only liability you have is the property you signed up for. If you want to be safe you should find out fom your solicitor what property you own and then find out the size of the mortgage, if it is in arrears etc. If it is you need to approach your bank and work out some arrangement otherwise it will wreak havoc on your future credit. I ould advise that you father talk to a financialy literate person immediately. Is there a family friend who is an accountant/tax consultant or something of that nature.

meditraitor

Its a tough one alright, you are right to be bitter and its really up to you to help out your family in the future.
I cant give you any sage advise but they sound like they gave you a good start in life so dont be too hard on them because in the end Family is Family.

Agent J

http://www.mabs.ie/

This should be your first point of call.

You should get all the paperwork of whatever you have signed up to. Anything beyond that is not your responability. I know its family and all that but this is a needs must situation and if the rest of your family will not come clean with you then you need to take steps to protect yourself.

You need a full and frank outlay of what your situation is so a plan be formed to get out of it. Mabs should be able to help you with that.

And remember no how bad it is. It is not the end of the world.

silverharp

Apart from Mabs see if your dad will see his accountant about it. Maybe hearing it from a respected third party might focus his mind. If you Dad isnt handling this very well he maybe running up more debt and ignoring communications from creditors.

LegacyUser

Hmmm, I seem to have given off a bit of a bad impression here about my parents. My Dad has taken the whole thing quite well, a bit distraught as anyone would be when they see their whole life savings and investments going under after 50 years of working. They're still working and trying to figure out what to do though, and from what I understand they're living off savings at the moment and not taking wages from the company in the hope that that they can prevent it from going under.

They're very private about their finances though so I never quite know what's going on with them.

Our home house is paid off, but if worst came to worst, could the bank take this house to supplement the debt owed to them? Would there be any possibility that they could sell the house to me for €1 or whatever to prevent this from happening?

With regards to my mortgage, Dad pretty much handles it as if it was his own house, and this was kind of the agreement as I really did not want to buy in to it. As far as I was concerned, in the end it was just a way for him to get a house without having to pay stamp duty (as I was a first-time buyer). Plus he has been doing this for years and has all the expertise that I don't have.

Is it about time that I sat down with them and had a proper talk about this.

Thanks for all the replies so far?

Agent J

The number one rule to protect your family home is you must engage with the bank as soon as you have any kind of trouble with a loan secured on it.

Your house might be paid for but was it used as security for any other loans?

No judge in the country would grant reposession of the family home to someone who has tried to make some sort of arrangement with the banks.

Sit down and talk about it. At least it will clear the air and answer questions for you.

SarahMc

I don't think it is your business tbh, and I think your parents would be appalled to think you are worrying about them/their finances.

Their business is going through a tough time now, but I'm sure they have lived through times just as tough and weathered it (sky high interest rates, young family etc).

Savings, mortgage free PPR, family grown, property portfolio all rented out, I really don't think your folks are anywhere near penury.

iguana

Agent J wrote: »

Your house might be paid for but was it used as security for any other loans?

No judge in the country would grant reposession of the family home to someone who has tried to make some sort of arrangement with the banks.

That's not true. It has not happened yet in Ireland but that is only because situations like that of the OP's family have never really happened before.

In Ireland there is no such thing as a non-recourse mortgage. So if the OP's parents can not keep up repayments on their other houses they will end up being repossessed. If they are repossessed in negative equity his parents will be liable for the shortfall and other costs. They will then have to make repayments on this money and if they can not make those payments they are in danger of losing their house and being declared bankrupt.

Bankruptcy in Ireland is very harsh, it lasts 12 years and they would lose their savings, private pensions, any lump sum they come into in that time and they will have their earnings garnished in order to pay back at up to 50% of what they owe. It's possible that the government will change these laws over the next few years as more and more face bankruptcy, but there is no guarantee that will happen.

OP, You should advise your parents to talk to their lenders and negotiate with them. They may be willing to compromise with your parents on monies owed if they sell some/all of the properties now. Prices are set to continue falling for some time so the lenders may accept that if they make a deal now they will get back more than they would by pursuing your parents into bankruptcy in a few years.

You also really, really need to sort something out as far as the house you and your sister own. The negative equity on this property may prevent you from having a mortgage when you do wish to buy a home. Find out what is owing on it, what it's renting for and what you could sell it for. Then make an informed decision on what to do. When you have the figures seek advice, maybe on the property forum here or on thepropertypin A&E forum. When you have the facts make a decision with your sister.

Mr Benevolent

Would there be any possibility that they could sell the house to me for €1 or whatever to prevent this from happening?

No, a fair market price must be paid. OP, why do you want to take responsibility for something that you had no control about and even argued against? It's like you want to be a mini-NAMA or something. Besides, with 20 propeties in negative equity and a failing business there's no way you could ever pay that off. You've enough problems dealing with the mortgage you parents forced you to get. Let your dad take responsibility for his mistakes.

Ask yourself this: Would you let your kids bail you out if you made the same mistakes if it meant them being in debt for the rest of their lives? There's very little chance of you paying off (at a rough estimate with 20 properties minus mortgage payments) €8,000,000 in mortgages.

Eight million euro. Are you willing to put yourself against a wall for that?