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

LondonGent

Sacredcat wrote: »

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.

This is a very good option also and worth me looking into.

securityguy

"as executor, you could consider borrowing money in the name of the estate"

Given the circumstances outlined, no sane lender would lend to this estate without a personal guarantee, possibly secured, from the executor. YM99 I think probably knows the details, but such lending is possible if the estate is obviously good for it, long term, in that there are clearly saleable assets which cannot currently be sold (perhaps there's a "so-and-so has two years to vacate" clause, or a beneficiary who needs money right now and a house that's already got offers on it, or whatever)..

But there's no security worth talking about in this estate: if the executor can't sell the asset, why would the lender have any more luck? There's no particular reason to believe that a property that won't sell for today will sell tomorrow: "it might take two years" is code for "there's precious little chance of it selling in any given week, but given enough weeks, we might get lucky". In the meantime, the estate is being diminished by the cost of running the property.

Executors can and do borrow to deal with liquidity problems in estates, and lenders will lend. If an estate is solvent but illiquid, then lending against assets is not unreasonable (although the interest rate might be quite high to acknowledge the inherent risk in this, and it might involve taking charges over assets). But this estate is only really solvent by virtue of a property whose realisable value is unknown and possibly, in the short-to-medium term at least, zero. Who would lend?

Sacredcat

I am getting the impression he is sole beneficiary. Or main beneficiary.
Is it possible for him to lend the money from himself personally, to himself as executor? The sums discussed aren't large. the loan risk is on him. He's probably good for this risk, since he works overseas by the sound of it.

securityguy

"Is it possible for him to lend the money from himself personally, to himself as executor?"

If he's the main beneficiary, why bother? Just pay the debts, personally, and recoup the money when the estate is liquidated. The effect is the same, but the transactions are simpler.

troubleinparadise

Sacredcat wrote: »

I am getting the impression he is sole beneficiary.

It depends which of his threads you read - sometimes he is the sole beneficiary, sometimes he has a sibling who is also a beneficiary.

LondonGent

troubleinparadise wrote: »

It depends which of his threads you read - sometimes he is the sole beneficiary, sometimes he has a sibling who is also a beneficiary.

For simplicity then, lets just assume for this scenario that I am the executor and the sole beneficiary and I live abroad and have done so for over 25 years.

Yes, I have opened other threads related to different questions and scenarios so there is no point really to compare this thread with other threads which are of a different nature.

So thank you so far for your input and I look forward to any future help or positive guidance you can offer to assist me in my investigation of what I can or cant do.

LondonGent

securityguy wrote: »

"Is it possible for him to lend the money from himself personally, to himself as executor?"

If he's the main beneficiary, why bother? Just pay the debts, personally, and recoup the money when the estate is liquidated. The effect is the same, but the transactions are simpler.

Its a matter of personal cashflow and cashflow in the estate. If I pay off the lender outright from the estate, there is no cash left to maintain the property until its sold.

So yes, if I had a guaranteed buyer for the property within days of probate being released I would do it, but my fear is that if the property in the estate does not get sold for months I will need to start funding the estate myself from my own funds.

Whilst paying for the property costs myself could possibly be viewed as an "investment" by some becasue I will be a beneficiary of the sale of the property, the maintenance charges for the property are high at 300gbp per month and on top of that there are electricity bills and other property related bills, so this all adds up quickly.

So paying off the lender right off for me is not really a desirable option and if I can negotiate with them this is great.

In the US for example, as far as I am aware, an executor can actually negotiate with lenders to have debt written off or reduced, which to me seems perfectly acceptable/normal.

I do not know why the UK is different. It does not seem fair to me that a lender gives out an unsecured loan (without insurance) payable over 5 years only to have their hand out on death and demanding full payment, non negotiable.

Some of you accuse me of trying to be underhanded by the mere suggestion that I would like to negotiate a debt, but just think about that for a minute.

Yorkshireman99

There is no requirement for you to fund the cashflow shortage. The creditor just has to wait a reasonable time, up to a year for payment. Putting the property up for auction should solve the problem.

LondonGent

Yorkshireman99 wrote: »

There is no requirement for you to fund the cashflow shortage. The creditor just has to wait a reasonable time, up to a year for payment. Putting the property up for auction should solve the problem.

I was not aware they are obliged to wait for a reasonable amount of time up to a year. That is very good to know.

Putting a property up for auction in my opinion would be a poor decision, yes, it would resolve the estate but I might as well just take some money, put it in a pile and burn it becasue everyone knows at auctions, sellers get shafted.

This is the second time you have mentioned auctions. Are you an auctioneer?

Manxman_in_exile

Is that right? Maintenance costs of £300 per month on a £50,000 property?


And those costs exclude utilities?