Success Story: Settling a mortgage debt

We have written in the past about how we have assisted clients settle mortgage shortfall debts, you can view them here and here. We are constantly helping clients settle mortgage shortfalls and this is another example of how we helped.

Background Information

We were contacted by Tim and Sarah (not their real names) about a debt they owed. The debt had been secured over an investment property they owned in Gladstone. The property had been bought in 2011 for $420,000, however, property values in Central Queensland had reduced significantly since then.

Tim and Sarah had tried to sell the property, but they were unable to. This resulted in their bank taking possession of the property and selling it for $180,000, in late 2018. The shortfall the bank suffered was in the vicinity of $250,000.

Tim and Sarah had taken out mortgage insurance. However, this didn’t protect them it only protected their bank and the mortgage insurer was now chasing Tim and Sarah for a debt of just over $250,000.

Tim and Sarah could not pay $250,000 to the mortgage insurer. However, they did have approximately $75,000 in a joint bank account which they were prepared to use to make an offer of settlement. However, they wanted to retain some of the funds they held in their bank account, if possible.

Settlement Agreement with Mortgage Insurer

Tim and Sarah engaged us to assist them. We wrote to the mortgage insurer on their behalf and:

  • Advised they were both nearly 50 years old and had one dependent child who was 10 years old.
  • Provided details of their income, which was not sufficient for them to have to pay income contributions in bankruptcy.
  • Advised what funds they held in their bank account.
  • Provided details of their options including settling the debt with the mortgage insurer and filing for bankruptcy.
  • Provided details of the return to the mortgage insurer in bankruptcy.
  • Made an offer of settlement which was better than the return to the mortgage insurer in bankruptcy but also resulted in Tim and Sarah retaining some funds which they held.

After some negotiations, the mortgage insurer agreed to accept $50,000 in full settlement of the debt they were owed, which was over $255,000. They also agreed not to record any defaults with any credit reporting agencies in respect of Tim and Sarah.

This was a great outcome for Tim and Sarah as it meant they could keep some of the funds they held and they were released from the debt they owed. It was also a better outcome for the mortgage insurer, than if Tim and Sarah had gone bankrupt.

Contact us for assistance

If you are struggling with debts we can help. This may include helping with settling debts which you or your business owe to creditors including the ATO, banks or mortgage insurers. So, don’t delay things any further and get in touch with us on 1300 906 966 or send us an email at mail@cactusconsulting.com.au to arrange a free confidential initial discussion.

Posted on 10-06-20 in Bankruptcy Assistance, Debt Agreements, Personal Debts.