Mortgage from hell

Discussion in 'Legal Issues' started by Nathan123, 26th May, 2017.

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  1. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I dont "think" Part IVA applies as there is no predominant purpose around a tax benefit. This is about getting out from the lenders hooks. Like a lender of last resort but on more palatable terms.
    Some deceased estate planning issues for a lawyer in this one if there are other family, super etc
     
  2. Bonz

    Bonz Well-Known Member

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    The lender will need to default the borrower, but they can generally choose to chase the guarantor rather than the borrower. In this event the guarantor can then seek to recover its loss from the borrower.

    If mum and dad have provided a limited guarantee and there is sufficient equity in the property, they should be able to walk. That I is the big if. The lender really has little option but to let them go. They need to get legal advice to find out exactly what they saddled up for.

    Mum & dad would also have had to have received independent legal And/or financial advice prior to the lender accepting them as guarantors. Maybe their then advisors failed to do the job properly and they may have recourse against them. Insurers are generally pretty commercial in respect of such claims and they have deep pockets.
     
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  3. TMNT

    TMNT Well-Known Member

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    its threads like these that really put things into perspective,

    although there are heaps of people doing very well with RE investment, its a huge reality check
     
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  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Its also possible the bank will not pursue a guarantee. Banks hate chasing elders and may just bankrupt the borrower
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Paul's post reminded me that I had a client several years ago who walked away from some properties. The banks never chased him. One was held by a corporate trustee with his dad as guarantor, and the dad was never chased either. More than 12 years have passed now too so no action can be taken.
     
  6. scientist

    scientist Well-Known Member

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    So stating the obvious here but why can't he: transfer / hide assets away until empty (try anyway, might get clawbacked in bankruptcy proceedings), declare bankruptcy, parents lose 300k as guarantee sounds to be limited. Total damage: 300k + bankruptcy.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    He could, but maybe he doesn't have any other assets and maybe the stamp duty and CGT consequences could be too great. This would be something for the guarantor to consider.
     
  8. scientist

    scientist Well-Known Member

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    Well that makes things even simpler - if he has nothing else, then just declare bankruptcy, cop the 300k loss, so he stands to gain 1200-500-300=400k from declaring bankruptcy. 7 years of having to use your spouse's name for everything... it's worth it I reckon.
     

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