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

Yorkshireman99

Sacredcat wrote: »

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.

Neither option would be prudent nor would they fall within the executor's remit.

LondonGent

Yorkshireman99 wrote: »

You are quite wrong in your approach to executorship..

I dont think my approach is "wrong", merely my understanding of its boundaries is not clear to me hence why I am coming onto a forum to ask what the limits are. If you are a purist, then sure, you might think my approach is "wrong" but as I mentioned I have to ask all the questions and validate the answers, not just say "ok you must be right" and move on.

Yorkshireman99 wrote: »

It is not the executor's job to try and reduce legitimate debts or to pick and choose.

I still believe that an executor makes decisions based on what he has to work with and to settle the estate to the best of their ability, not just pay things because someone asks to be paid. There is I believe a duty to investigate and settle the debts in a proper and orderly fashion so as not to damage the estate.

Yorkshireman99 wrote: »

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.

I have to disagree with you on both points here. Firstly, Auctions do not reflect the true price of a property, it merely reflects the price people are willing to pay AT AN AUCTION. You must be a part time auctioneer. Price indexes of property values are not based on auction values so not sure where you obtained that infromation from.

Secondly, a property may not sell for a variety of reasons, not just thats its overpriced. Other factors can include location, condition, cost of upkeep, market demand.

Manxman_in_exile

When you make your offer to the creditor will you:

• tell them there is an asset worth £50k, or
• tell them the estate is insolvent, or
• allow them to "assume" the estate is insolvent, or
• stay silent as to what assets exist?

LondonGent

Manxman_in_exile wrote: »

When you make your offer to the creditor will you:

• tell them there is an asset worth £50k, or
• tell them the estate is insolvent, or
• allow them to "assume" the estate is insolvent, or
• stay silent as to what assets exist?

The lender would already have access to the probate valuation if they wanted so no point in hiding the facts.

My strategy so far would be : I would write to the creditor explaining that whilst the estate is solvent, there is not very much in the way of cash and there are other creditors before them and others being discovered as time goes on. There is a property worth £50k but would take some time to sell and that could possibly take more than a year, possibly two to come through. I would ask them if they would consider lowering their settlement amount to £4k from the £9K owed in order to clear the debt because currently the estate is in a position to pay £4k, otherwise they will need to wait until all the other creditors are settled in their correct order assuming there will be money left to pay them all. I would also state that the bereaved has no spouse or family members living in the UK so chasing the debt might be futile for them and would make more sense to settle the debt with what can be paid now, or they can choose to wait.

Is it worth trying?

I doubt that an unsecured creditor would move to remove me as an executor based on this tactic but of course how can I be sure?

Keep_pedalling

Manxman_in_exile wrote: »

When you make your offer to the creditor will you:

• tell them there is an asset worth £50k, or
• tell them the estate is insolvent, or
• allow them to "assume" the estate is insolvent, or
• stay silent as to what assets exist?

Only the first one will totally avoid landing you in the proverbial at some later point, no creditor is going to accept a lower offer if the estate is solvent.

You also need to ascertain that there are no more hidden depts by placing a notice in the Gazette
https://www.thegazette.co.uk/wills-and-probate

LondonGent

Keep_pedalling wrote: »

Only the first one will totally avoid landing you in the proverbial at some later point.

You also need to ascertain that there are no more hidden depts by placing a notice in the Gazette
https://www.thegazette.co.uk/wills-and-probate

Yes thats one of the first things we did! It cost 250gbp to place it but worth it I think.

The problem was though that we had discovered this 9,000gbp debt after contacting his bank to close the accounts, and we knew nothing about it because the bank had set up a separate account for it and we did not have anything in our fathers records. They [the bank] piped up and said "hey, he owes 9k on this unsecured personal loan" and we were like !!!!!!!!!!!

Basically that pretty much wipes out the cash in the estate and leaves little room for any other bills to pay, like electric, home insurance etc.

Manxman_in_exile

I hope the creditor isn't my bank or one I've got shares in...:rotfl:

Yorkshireman99

craigedmonds wrote: »

I dont think my approach is "wrong", merely my understanding of its boundaries is not clear to me hence why I am coming onto a forum to ask what the limits are. If you are a purist, then sure, you might think my approach is "wrong" but as I mentioned I have to ask all the questions and validate the answers, not just say "ok you must be right" and move on.


I still believe that an executor makes decisions based on what he has to work with and to settle the estate to the best of their ability, not just pay things because someone asks to be paid. There is I believe a duty to investigate and settle the debts in a proper and orderly fashion so as not to damage the estate.


I have to disagree with you on both points here. Firstly, Auctions do not reflect the true price of a property, it merely reflects the price people are willing to pay AT AN AUCTION. You must be a part time auctioneer. Price indexes of property values are not based on auction values so not sure where you obtained that infromation from.

Secondly, a property may not sell for a variety of reasons, not just thats its overpriced. Other factors can include location, condition, cost of upkeep, market demand.

You clearly don't understand the legal responsibilities of an executor. Their obligation is to pay the valid debts. What you are trying to do is avoid some of those for the benefit of the beneficiaries. That is a flagrant breach of your duties as an executor. An executor, by accepting the task agrees to treat all beneficiaries correctly and without bias or favour. It is not the executor's function to carry out their duties according to the law. What you seem to want to do is effectively steal from some creditors for the benefit of others. That is illegal quite apart from being morally despicable.

As the property prices there are all sorts of factors that will affect the value. Ultimately they will have an effect on the price that someone will pay. Ask any estate agent and they will tell you that they have, or have had, properties on their books that will never sell unless the asking price is dropped or the market surges upwards. Owners get an inflated idea of the value and just cant be convinced they are wrong. Price indices are based on all sales including auctions.

TW1234

Of course you can ask a creditor to accept a reduced settlement, but I see no reason why in the circumstances they would have any reason or inclination to agree. The estate is not insolvent; it is cash poor.
The matter seems to hinge on cash flow; about £5000 is needed to add to the existing cash assets (£4000) to settle the debt within a reasonable period. The creditor could force the sale if necessary by acting against the executor. You have already assumed that role and the costs of action and indeed the property sale price would be of no concern to the creditor.
You seem to believe that the property has a value of £50,000 but that valuation is not readily realised; if you have such confidence, then perhaps the beneficiaries would be prepared to loan the required cash of £5000 unsecured to the estate, even contemplating raising that amount by giving their own security to a lender if they are short of cash.Or if any beneficiary so wishes, they can purchase the property from the estate at fair value. If it is a sole beneficiary and as the estate is not liable for IHT, it could be purchased for £5000.
However, auction does look to be the simplest safest method

Sacredcat

If your approach of negotiating does not work, and you still have this cash flow problem, as executor, you could consider borrowing money in the name of the estate, to pay the debts, with interest payable by the estate. E.g. Borrow £8000 or whatever you think appropriate, for a couple of years, so that you have enough to pay the debts and pay the interest.
I believe you have power as executor to borrow. You may want to check this I.e. get legal advice. But usually a trustee has a power to borrow.
You may want to also consult and get approval of the the beneficiaries. Sometimes there is an implied duty of the executor to consult them, I believe.