This week, Colm Arthur of Arthur Insolvency Services Limited talks to Topic about the process of paying a mortgage when a couple are going through separation or divorce proceedings.
Why is a mortgage more binding than a marriage?
Personal insolvency was introduced following the Economic downturn to help people where possible, to stay in their family home while dealing with their restructured debt. Many people seeking help with debt are couples in the process of separation and divorce.
When couples buy a home together, part of the cost of the home is often paid by way of a joint and several liability mortgage borrowed from a financial institution.
In simple terms, a joint and several liability mortgage is where two people agree to pay the full mortgage together, but also agree to pay the full mortgage separately. For example, where one Co-borrower pays €99,000 of a €100,000 mortgage, that Co-borrower is still liable for the last €1,000. For many, the fact that they can get divorced from each other but would still be linked through a joint and several liability mortgage can be confusing. I am often asked by co-borrowers, “can I not just pay my half”.
Personal Insolvency applications have provided a solution where one borrower wishes to stay in the family home and deal with at least part of the mortgage. The High Court has ruled that where a Personal Insolvency Arrangement (PIA) has proposed that one party, usually the primary carer for the children, is in that position to pay a mortgage to at least the value of the home, then it is possible for that person to stay in the home notwithstanding the co-borrower’s liability remaining for the loan.
Therefore, when going through separation and/or divorce proceedings is a good time to contact a Personal Insolvency Parti-tioner so that you can be properly advised of the financial consequences of separation or divorce.
When people hear mention of Courts (in particular the High Court), it is understandable that concerns would be raised as to how such an application would be paid for. In situations where the family home is in mortgage arrears, the governments “Abhaile” scheme, through the Legal Aid Board, will pay a fixed legal fee for any case brought to the circuit or High Court.
For more information, contact Arthur Insolvency Services Limited on 044-9341860 or see capip.ie
