Unsecured Debts. Can I negotiate with the lender to reduce debt amount?

LondonGent

My father passed recently and I found that he owed 9,000GBP to a bank for an unsecured loan he took out online through the banks web site.

The bank is requesting that we settle the loan in full from the estate, however the estate only has 4k of cash at the moment. (There is a property worth 50k which we will try and sell but it will take months maybe years to sell it).

There is 4k of cash in the estate account but we might have other expenses coming in for utility bills related to the property and executors expenses so don't really want to hand over the full 4k to the lender, just becasue I am legally obliged to. I still need to exercise common sense when managing the estate.

Can I write to the bank and ask them to accept a smaller amount? or negotiate with them to reduce the debt amount?

Any suggestions?

TonyMMM

If you are the executor of the estate you have legal obligations to fulfil, and if you don't you could find yourself liable for unpaid debts.

You can ask the bank for a settlement figure - but I can't see any reason why they would agree - there are plenty of assets in the estate to pay the debt.

They should allow a reasonable time for you to realise any assets and settle the estate, but saying a house might take years to sell is not going to get very far as an excuse (if it did it is very overpriced and you could sell it at auction if necessary)

LondonGent

TonyMMM wrote: »

If you are the executor of the estate you have legal obligations to fulfil, and if you don't you could find yourself liable for unpaid debts.

You can ask the bank for a settlement figure - but I can't see any reason why they would agree - there are plenty of assets in the estate to pay the debt.

They should allow a reasonable time for you to realise any assets and settle the estate, but saying a house might take years to sell is not going to get very far as an excuse (if it did it is very overpriced and you could sell it at auction if necessary)

So you are saying I can try it. Whether they accept it is another matter.

Thats great. I will give it a go. I just need to decide my strategy.

In my layman's opinion though, the debt is an unsecured loan, taken out over the interwebs no less, so essentially is given out at the risk of the lender, otherwise they will have made it a secure loan, in which case I would need to pay it or risk losing the property assuming the loan was secured on the property, which it wasn't.

This is also why unsecure loans are probably the last in line to be paid.

As for the property, in the same building where the property is located there are 7 other empty properties, one of which has been on the market for over 2 years, so yes, it literally could take years to sell it.

Can the [unsecured] lender force me to sell the property at auction? I would not have thought so. They have no say in how the property is sold do they? And thats "IF" I intend to sell it (see side note below).

My interpretation of it would be that whilst I have a legal obligation to settle debts, I also have a responsibility to the beneficiaries which does not involve simply paying everyone with their hand out just becasue the estate is solvent, especially unsecure loans.

I do sincerely believe/feel that I have a duty to minimise the payment of debt and maintain as much of the estate as I can and if this includes trying to negotiate with creditors or delay creditors as much as possible, then I think need to make the effort.

Why else would I put an ad in the Gazette to eliminate any claims after 60 days, which in itself is a loophole to avoid paying claims made after 60 days.

So for me its common sense to try and negotiate with the bank first, as long as I know that I have the option to do it.

On a side note: I don't live in the UK so they can always try and chase me for the debt, but it will cost them time and money, when they could accept a negotiated settlement amount.

uknick

I think you may have misinterpreted the duties of an executor here in the UK.

This link gives an indication of what is required.

https://www.thegazette.co.uk/wills-and-probate/content/100081

You'll see the first duty is to settle debts where possible. It is not to negotiate to reduce liabilities and therefore maximise the pay out to the beneficiaries.

From what you have said it is very clear there are assets in the estate to clear the loan without negotiating with the bank.

Also, don't forget, when you complete the probate forms the estate value will be publicly available to the creditors.

With regard to telling them to whistle for the money, what makes you think they can't come after you for it regardless of where you live?

TonyMMM

craigedmonds wrote: »

Can the [unsecured] lender force me to sell the property at auction? I would not have thought so. They have no say in how the property is sold do they? And thats "IF" I intend to sell it (see side note below).

Creditors could apply to the courts for a range of legal remedies - making the loan secured, removing you as executor and taking over the role themselves, or to force a sale. Whether they would is anyone's guess.

LondonGent

uknick wrote: »

I think you may have misinterpreted the duties of an executor here in the UK.

This link gives an indication of what is required.

You'll see the first duty is to settle debts where possible. It is not to negotiate to reduce liabilities and therefore maximise the pay out to the beneficiaries.

From what you have said it is very clear there are assets in the estate to clear the loan without negotiating with the bank.

Thank you for your detailed response and the link.

:T

I think the key here is the wording "where possible" and in my layman's view is possibly open to interpretation as it makes no mention that I cannot actually negotiate with creditors. As the executor administering the Estate, the word "administer" is akin to "managing" and therefore negotiating with creditors to reduce liabilities is [I feel] part of the management process in order to make sure that all those who need to be paid will be paid and for those that we might not be able to pay, give them the opportunity to accept something rather than waste their time and resources fighting for it. I could be interpreting this the wrong way but cant find any solid evidence to suggest otherwise.

In my experience with credit repair, in normal circumstances, most lenders offering unsecured loans would rather take something now rather than wait an undetermined amount of time to receive full settlement and I am wondering whether the same strategy would apply here.

Then there is the issue of selling the property. There is no guaranteed turnaround period for selling it. The market in the UK is very bad and in the same building there are properties there which have sat empty for over 2 years. Would an unsecure lender wait so long to be paid? Or would they take what they can now? No way to know unless I ask them.

uknick wrote: »

Also, don't forget, when you complete the probate forms the estate value will be publicly available to the creditors.

Yes this is true but when we submitted the probate form we were not aware of this loan at the time so was not included in the statement, so this debt more or less brings the cash estate to the brink of being insolvent in terms of cash in the bank, so essentially, unless the property gets sold, the lender has to sit and wait until such time the property is sold to recover their money.

uknick wrote: »

With regard to telling them to whistle for the money, what makes you think they can't come after you for it regardless of where you live?

Well obviously I would not be that blase about it with them, but my circumstances dictate that it would be complicated for them to recover any third party debt. Of course there is no reason for them not to try but it would be complicated and costly for them and any sensible company would either get what they can or write it off.

LondonGent

TonyMMM wrote: »

Creditors could apply to the courts for a range of legal remedies - making the loan secured, removing you as executor and taking over the role themselves, or to force a sale. Whether they would is anyone's guess.

Good points and yes, right now for me its a complete unknown (i feel another thread coming up soon!)

Thanks.

Yorkshireman99

craigedmonds wrote: »

So you are saying I can try it. Whether they accept it is another matter.

Thats great. I will give it a go. I just need to decide my strategy.

In my layman's opinion though, the debt is an unsecured loan, taken out over the interwebs no less, so essentially is given out at the risk of the lender, otherwise they will have made it a secure loan, in which case I would need to pay it or risk losing the property assuming the loan was secured on the property, which it wasn't.

This is also why unsecure loans are probably the last in line to be paid.

As for the property, in the same building where the property is located there are 7 other empty properties, one of which has been on the market for over 2 years, so yes, it literally could take years to sell it.

Can the [unsecured] lender force me to sell the property at auction? I would not have thought so. They have no say in how the property is sold do they? And thats "IF" I intend to sell it (see side note below).

My interpretation of it would be that whilst I have a legal obligation to settle debts, I also have a responsibility to the beneficiaries which does not involve simply paying everyone with their hand out just becasue the estate is solvent, especially unsecure loans.

I do sincerely believe/feel that I have a duty to minimise the payment of debt and maintain as much of the estate as I can and if this includes trying to negotiate with creditors or delay creditors as much as possible, then I think need to make the effort.

Why else would I put an ad in the Gazette to eliminate any claims after 60 days, which in itself is a loophole to avoid paying claims made after 60 days.

So for me its common sense to try and negotiate with the bank first, as long as I know that I have the option to do it.

On a side note: I don't live in the UK so they can always try and chase me for the debt, but it will cost them time and money, when they could accept a negotiated settlement amount.

Is there a will and who is the executor? You need to realize that the executor must act according to the law. and not with what you call common sense. You cannot pick and choose. Since there is value in the estate the creditors, including the bank, are entitled to be paid in full. To tell them there was no money or just a reduced amount would be fraud. The fact that the loan was unsecured makes no difference.

Yorkshireman99

craigedmonds wrote: »

Thank you for your detailed response and the link.

:T

I think the key here is the wording "where possible" and in my layman's view is possibly open to interpretation as it makes no mention that I cannot actually negotiate with creditors. As the executor administering the Estate, the word "administer" is akin to "managing" and therefore negotiating with creditors to reduce liabilities is [I feel] part of the management process in order to make sure that all those who need to be paid will be paid and for those that we might not be able to pay, give them the opportunity to accept something rather than waste their time and resources fighting for it. I could be interpreting this the wrong way but cant find any solid evidence to suggest otherwise.

In my experience with credit repair, in normal circumstances, most lenders offering unsecured loans would rather take something now rather than wait an undetermined amount of time to receive full settlement and I am wondering whether the same strategy would apply here.

Then there is the issue of selling the property. There is no guaranteed turnaround period for selling it. The market in the UK is very bad and in the same building there are properties there which have sat empty for over 2 years. Would an unsecure lender wait so long to be paid? Or would they take what they can now? No way to know unless I ask them.


Yes this is true but when we submitted the probate form we were not aware of this loan at the time so was not included in the statement, so this debt more or less brings the cash estate to the brink of being insolvent in terms of cash in the bank, so essentially, unless the property gets sold, the lender has to sit and wait until such time the property is sold to recover their money.


Well obviously I would not be that blase about it with them, but my circumstances dictate that it would be complicated for them to recover any third party debt. Of course there is no reason for them not to try but it would be complicated and costly for them and any sensible company would either get what they can or write it off.

You are quite wrong in your approach to executorship. The creditors are fully entitled to be paid in full. It is not the executor's job to try and reduce legitimate debts or to pick and choose. Any long delay in selling the house as you can put it up for auction. Realistically the only reason a property will not sell is that it is overpriced. Auction establishes the true open market value.

securityguy

"The creditors are fully entitled to be paid in full"

Indeed, and the executors' responsibility is to them, before the beneficiaries.

The OP likes common sense, so think of it this way. You are alive and well, and owe the electricity company five hundred quid. You'd also like to give your children five hundred pounds. Are the electricity board obliged, legally, morally, whatever, to haggle on your electricity bill so you can give gifts to your relatives? It's the same for estates: the first task is to wind them up, settle debts, and fulfil legal obligations. After that, what's left over goes to beneficiaries. They are, I'm afraid, second-class citizens in this: with some very limited exceptions, debts trump legacies. It's not a matter of managing creditors and beneficiaries as peers, as the OP implies: the creditors come first.

Sacredcat

Sorry for your loss.

The estate is solvent. However, If not for the property, the estate would be insolvent. If the flat will never sell, the estate will be insolvent. It sounds like hassle taking on the role. You have a choice whether or not to be administrator/ executor.

Is there someone in the UK who could be exec of administrator? A family person?

If you want to be executor or administrator you could rent the property out you could earn money to pay the debts.

Or You could offer to agree to convert to a loan secured on the property.