Different "codes" for loans

roseym

Anyone know what it means if you have a loan that is "coded"? Specifically "code 7 bad debt"? I know it isn't good news given the situation we're in, but just curious as to what the label means to the bank. Anyone know how many codes there are and where on the scale is 7? This is an internal banking term, the AIB bank manager let it slip when talking to us today but it has never been sent in a letter or anything, so think this is probably something that only people who work in banking might know.

Toots

Different banks have different code references for loans in arrears/loans on schedule etc. I know the bank where I work a grade 7 is the furthest on the scale, basically gone legal and is more than likely going to be written off, but you wouldn't be dealing with the bank manager on it, you'd be dealing with a solicitor and/or the collections department so that would make me think that our system is definitely different to AIB's. If AIB's code 7 was the same as ours you'd definitely be aware of how bad things were.

I wouldn't dwell too much on what 'code' is assigned to your loan, they're really just a reference for the bank so they can see at a glance what stage things are at. If it's in arrears then it's in arrears and the main thing you can do is keep the lines of communication open between you and the bank, which it sounds like you are doing.

roseym

Thanks Toots. Based on that, I'd say AIB probably go to an 8, we're pretty much as bad as it can get repayment/devalued security wise, but are in communication with them giving proposals for repayments etc so I'd say that's the only thing between us and some nasty solicitors letters.

Rebel1977

From my experience code 7 is one step away from a bad debt, code 7 is if yiou have connections to other borrowings i.e. property etc you are a 7, close to being bad debt, going on icb etc

roseym

No from what he said we're down as bad debt already, just not written off yet. I don't understand that bit at all...I thought all bad debts were written off but obviously there are different stages of them. Maybe they're hoping we will win the lotto? And the credit rating is defo in the gutter already. Minding it isn't even an issue anymore. I married into this mess this summer thinking it wouldn't have an impact on my credit rating (I was golden, oh how the mighty have fallen :rolleyes:). How wrong was I. As soon as I stupidly changed my banking address to the same address as hubbie my credit rating went into the gutter. I don't think I'd even be able to get a loan of a tenner now, whereas before I got married I was one of the lucky few still being offered loans by the banks.
So a 7 is defo worse than what you're saying I think.

Rebel1977

is it a substantial amount i.e. more than 100k or less than it. Should have exhausted all avenues before going the bad debt route, given you otions i.e. interest only, deferred payments etc

roseym

Yeah, it's well over 100k unfortunately. Basically the bank wanted a business overdraft to be gone, so it was converted into a personal loan for hubbie because the business owner, his dad, couldn't get another loan. His dad promised hubbie that he'd pay the loan off himself so all correspondence was going to him until April this year when I wrote a letter to the bank asking for all our accounts to be changed to the one address. I only found out about the loan at that stage as we got a letter saying that hubbies bank accounts etc were going to be shut within 30 days because of the loan being unpaid. Hubbie had assumed it was being paid all along and just forgotten about it. Quite a shock! We discovered then that his dad had managed to pay interest only for a little while but that for over a year hadn't even been paying interest. So hubbies dad has exhausted all the options up to this point unfortunately by just sticking his head in the sand. I picked a right mess to marry in to didn't I...

Rebel1977

Was there no guarantee signed ? I feel for you, surely bank could have reduced the overdraft and put balance onto loan instead of the entire thing. did you talk to your accountant ?

roseym

I wasn't on the scene at the time so not sure what was signed or not. A site of hubbies was used as security for it, is that what you mean by guarantee? He had bought it with the intent of developing the site, but with the way things went decided to keep it and that when we could we'd build on it for ourselves. The plan is all gone very pear shaped now unfortunately. We don't have an accountant, I'm a paye worker so don't need one, hubbie isn't working. Called into MABS for advice, they told us to declare bankruptcy which we'd rather not do if at all possible.

Rebel1977

Bankruptcy is last road you want to go down. Surely if they suspend payments or go interest only or if you offer some sort of small payment, they can't bad debt you, the money is out there even if you offer some small minimum payment they would find it very hard to render you a bad debt.