Order of debt priority

[Jool]

Not for me but can anyone tell me the following

If you are out of work what is the order of priority legally where debts are concerned:

1. Mortgage on property unemployed person is living in
2. Personal loan or payment as guarantor for loan defaulter
3. Community fees

Do I have the order correct?

If you default on a personal loan how long does it take for that debt division to take you to Court?
Can they embargo your bank account even if you have changed banks?

[fljordan]

Chapter II of Part XVII of the Civil Code provides for the order of priority. In this case the order is:
1. Mortgage on property unemployed person is living in
2. Personal loan or payment as guarantor for loan defaulter

Regarding community fees they are not included in the order because in all cases the new acquirer of a property (bank or buyer from public action) shall be liable for community fees up to the limit of the fees assessed for the period to date of the year when the transfer of ownership took place and for the immediately precedent year (s. 9 of the Horizontal property Act). Fees owed before this period could be included in the third position.

Usually 4-6 months is the average for bring an action for arrears recovery.
They can embargo all you accounts if a court decree so but courts are slow finding new accounts of debtors

[Jool]

Thank you for your very clear answer, one more question - if you are the person guaranteeing the loan and not the unemployed person then does the loan repayment take precedence over the loan payment as guarantor or is the order always Mortgage on property person is living in, whether debtor or guarantor, and then the loan repayment?

[fljordan]

Could you explain your question with an example? I mean, something like 'A owes €50K to a bank (B) ....and has also a loan with C guaranteed by D..... etc

[Jool]

OK

A -is the debtor and lives in rented accommodation
B - guaranteed the loan for A

A is unemployed and misses loan payments, and does not own any property
B has a joint mortgage on a property with C where they live together but this mortgage is with a different bank to the bank who lent A the money. C is NOT a guarantor of the loan

Does B´s mortgage get paid before the loan payments?
Can A´s bank put an embargo on the joint bank account of B and C and prevent the mortgage being paid for the loan to be paid?

[fljordan]

If A is in arrears the bank may execute the B's guarantee pursuing B's assets. Among other B's assets he owes half of a property and half of a bank account.
Half of the money in this account could be seized by A's bank
Regarding the property, last stage of proceedings for arrears recovery provides for embargo of assets (money, real estate, etc) so after seeking for any B's assets if no assets were found or were insufficient A's bank may register a charge on the B's property at Land Registry. As this registration by which half of the property is seized will remain available for the general public until the A's debt is paid no buyer would be willing to buy the property.

[Jool]

THanks

So on the basis that A defaults...

B´s assets / money can be taken BEFORE B´s mortgage is paid?

Can you also explain this second part below a bit more as I am not sure I understand it

As this registration by which half of the property is seized will remain available for the general public until the A's debt is paid no buyer would be willing to buy the property.

Do you mean that in theory anyone else could come along and buy HALF the house or that half the house is not available for sale until the debt of A is cleared? Does that mean the full loan or only the payments in arrears?

How long does it take to get to the stage of B´s assets being embargoed or money taken from bank account bearing in mind that B has an account at a different bank to that of A´s loan?

Sorry this is all sounding really complicated but its a situation where A is about to lose job and B has had huge income drop since guaranteeing the loan so has no funds to pay when A cannot

[fljordan]

B´s assets / money can be taken BEFORE B´s mortgage is paid?

Yes, they can be. It is impossible to prevent A's Bank from foreclosing, but everything depends on the terms of the guarantee and the mortgage and above all on both banks' interest. As you know a mortgage is the transfer of an interest in property to a lender as a security for a debt. A mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower who remains the legal owner of the property, but banks gain sufficient rights over it to enable them to enforce their security, such as a right to take possession of the property or sell it by public auction

As this registration by which half of the property is seized will remain available for the general public until the A's debt is paid no buyer would be willing to buy the property.

That means that there is a charge on the property at the Land registry, so prospective buyers may apply for information of the property at the Land Registry and then discover that the property is not free of encumbrances. No buyer will be interested in a property charged because. In order to protect the bank, the mortgage is recorded in the Land Registry.

Do you mean that in theory anyone else could come along and buy HALF the house or that half the house is not available for sale until the debt of A is cleared?
I mean that the registered charge on the property runs with the land and binds all current and future owners of the property

Does that mean the full loan or only the payments in arrears?
It means the outstanding amount of the loan plus interest

How long does it take to get to the stage of B´s assets being embargoed or money taken from bank account bearing in mind that B has an account at a different bank to that of A´s loan?. Several months 4-6.

You have to bear in mind that my advice may not be very accurate without seeing any document of the case.

[Jool]

Thank you for taking so much time to provide such detailed information, greatly appreciated, I will pass it on.

I don´t have the documents etc as it is not my situation but I think the message is absolutely clear - do not act as guarantor of a loan for anyone.......!