In a dire situation - Mining town collapse

I've looked online everywhere and can't seem to find any relevant information or current experiences for my situation so I have signed up. I'm looking for anyone's help whether they have been in a similar situation or know someone who has.

I purchased a house in Newman at the height of the boom and due to falls in rents and it being vacant for the last 6 months I have been unable to sustain the mortgage. I have spoken to my bank and they have accepted a financial hardship application and for the next 3 months my payments have been adjusted so I'm able to pay. At the end of these 3 months it will revert back to the original amount - this I know I will be unable to pay. The house is on the market but looking at around a $420,000 shortfall - I'm unable to pay this. I'm seriously considering bankruptcy but I've been told that the banks maybe willing to accept a settlement offer in writing off the loan. I find it hard to believe that a bank would be willing to do this but my only other alternative if they say no is bankruptcy - which I would obviously like to avoid. I have no other assets and currently renting.

Has anyone had any first hand experience of banks willing to accept a settlement in this situation?

Please if anyone has any words of advice please get back to me, happy to receive in a PM if preferred.

 

Have a read of this thread and maybe have a chat to that poster to see if he came up with a solution.

Mortgage from hell

Unfortunatly there are a few who went down the same path as yourself, and being extremely late to the party makes it alot worse for many.

 

And this one
Update on our Gladstone situation
Hope you can sort it out.

 

Thanks for the link, I hadn't seen that one. I will contact him

 

Try PM @Kate Moloney . She has had similar experience and used to be active here.

Feel sorry for your situation and hope you find a solution soon.

 

Sit down and have a talk with the bank.

As you are renting and have no other assets, you have nothing much to lose.

If you don't get anywhere, bankruptcy would probably be the next step. Don't initiate his yourself, leave it up to the bank.
Marg

 

I have kept the bank up to date with everything and they have been pretty good with my situation. The 3 months of lower payments is helping. They are aware it is on the market and that there will be a significant shortfall. Once it is sold (If it sells) then that's when the discussions will start in regards to the shortfall. I have heard there are companies that can help with negotiations and I've spoken to one - with this level of shortfall they have quoted $45,000 which I feel is very expensive. What can they do for me that a financial counsellor or myself can't do?

 

Feel sorry for your case, but 45k fees is a bit expensive, speak to legal in this area and seek their advice.

 

Nothing. Nor do you need a financial counsellor.

It seems the three months of lower payments are simply delaying the inevitable.

You will only have one creditor, the bank. So simply deal with them yourself, one meeting at a time.

Sadly, you aren't the only one in this predicament.
Marg

 

Beware of companies that claim they will negotiate with the banks for you - for an unscrupulous fee. Also beware of people who claim they have asset protection strategies for you, at a high fee. They are generally not lawyers and their so called strategies don't work and are no set up properly anyway.

if you think you might go bankrupt perhaps it might be better not to keep paying the bank, even at lower repayments.

Seek legal advice (from a lawyer)

 

Geez...seek legal advice from a Lawyer. Perhaps you can sue the bank for lending you too much money and sue the Bank, the Estate Agent and the Valuation Company for overstating it's real value. 'Better Call Saul". Lawyer Up.

 

I've got no real advice here...except that I note your place is on the selling block. From a sales perspective, I would target the contrarian investor (your agent should have applicable ones and strategies) and hype that the mining is arguably at or near its lowest point - and reflected in prices accordingly such as yours.

 

Probably, ****** position to be in, glad I never bought up there, however had we all known the right time to get in & out of any market (crystal ball).

If a last ditch effort to avoid bankruptcy, leaving you with debt;
Even if you only got $200pw rent that's better than what you've been getting the past 6 months to help cover repayments.

Don't know if you know the area and how the mining game works but there won't be much call for anyone to purchase as a PPOR up there, those who have lived up there all or most of their lives know whats going on, the market etc, yours "maybe" an upgrade for someone but would have to be priced cheap for interest and quick sale, obviously leaving you with debt, obviously better if you could avoid agent commissions.

Many mine workers are supplied accommodation from the companies they work for, whether BHP or ancillary operators, either singlemans quarters (fifo including shut down contractors), or unit/house for non-fifo, supervisors and white collar that are fifo.

Make the price too attractive to resist for those companies and residents.

 

I wasn't thinking of that angle, but that could be worth the op pursuing.

I was talking about the bankruptcy side.

 

Honestly, you may as well declare bankruptcy. Pretty sure after 7 years you're free to do as you please again.

Can you pay back 420k in 7 years? No? Bankruptcy it is.

 

What is the tax treatment of the situation where the bank writes of the balance of the loan?

In the USA where a bank writes of an amount on the house the amount that is written off is added to the beneficiaries tax assessment as income. SA such they have to pay tax on the written off amount.

 

I'm not a lawyer, but it sounds like bankruptcy here might be preferable? The chance of the value going back up, perhaps in decades, is not great so even if you do pay off the asset you've got a house in the middle of nowhere reliant on a fossil-fuels based industry (so, not a great future long term). Even if mining did take off again, the undersupply that existed before the boom is long gone, so demand probably isn't ever going to reach what it did. You could pay it off you might still have a dud asset. At least bankruptcy ends.

 

Unrelated parties - No issue so its not a non-arms length debt forgiveness issue. Its not a CGT or income tax issue...A CGT loss will happen and is unaffected by the sum of the debt and although the trustee in bankruptcy or bank may "sell" the asset the CGT loss is still triggered and available to the taxpayer.

Other options to bankruptcy may be even shorter. I assume the only creditor is the lender.
What are my options for dealing with unmanageable debt? | Australian Financial Security Authority

 

It is not even a forgiveness of a debt if the borrow goes bankrupt. It is just a debt that is unable to be collected.

It may be better to declare bankruptcy now, get it over and done with, rather than dragging it on for the next 10 years or so throwing good money after bad.

seek legal advice.

 

And bankruptcy is 3 years +1 day in most instances. You may cut a deal with the lender and its less but I believe the credit report gets scarred for years longer than the bankruptcy. Most lenders ask if you have ever been bankrupt. The AFSA link above includes a financial counselling service that can be free in some cases.

Brokers ? How do lenders see a bankruptcy re a mining town and a single catastrophic loss v's say a failed string of creditors and business losses ? Are they more tolerant ? How long will lenders shun the bankrupt after discharge ?

I have a issue with s118-192 which imposes a changed costbase if a former home in a mining town is rented out. So taxpayer thinks they lost a mint but tax office says you made a profit for CGT purposes if you hold onto it and its value improves a little