Hi All,

any advice on this matter would be greatly appreciated.

I took out an overdraft with Lloyds/TSB in 2005/6 for £50k through my company.

The bank insisted that I have a Standard Security and Floating Charge on my house for the same amount.

when they went through their split Lloyds/TSB insisted that my account be transferred over to the TSB.

In the fullness of time the account overdraft was transferred over to TSB.

Then a year later TSB decided they could not manage my account (purely administrative) and insisted my account be transferred back to Lloyds/TSB

but as I live in Scotland there are no Lloyds branches and therefore, it was transferred to Bank of Scotland.

For various reasons the business failed and Bank of Scotland have called in the overdraft. Now, this is where I think it gets murky.

At no time did the Bank ask for or change in any way the Standard Security on my house and therefore Lloyds/TSB still have the second charge on my house but I don't owe them any money as the debt was repaid when I moved to Bank of Scotland.

I know they are the same group but they are all different companies.

Does anyone have a view if Bank of Scotland can take action against me regarding the second charge or do they have an unsecured loan?

Clearly I'm on the hook either way but there will be very different outcomes if the Bank can't action the second charge.

Thanks for having a look and if you need more info please let me know.

Gamekeeper

re titled and moved to Scotland forum.

be back late or others will help soon

Hi All, and any advice on this would be gratefully received.

We have a mortgage and a second charge on our house.

The second charge was to cover a business loan.

Now, this situation has been on going since the 2008 crash and we have been unable to repay the second charge and given other circumstances I know I will have to go bankrupt to get out of the situation.

However, we are still in control and I would like to take the following course of action

is it against the law and what would the implications be if any other than what I already have described.

If we say for example the house is worth £150K and the mortgage is £50K (1st Charge) and the loan is £50K (2nd charge) and we sold the house to a third party completely unconnected to us for £52K

repaying the mortgage but only paying £2K of the second charge

would the 2nd charge lender come after us for selling the house to cheaply?

I have simplified the situation to some degree but in essence that is the situation we are in.

Any views as said will be very welcome.

Gamekeeper

I'd be wary of this.

.... I think the second charge lender would be well within their rights to come after you and could choose to use Section 423 of the Insolvency Act against you....

I'm sure the experts will be along soon.....

Hi Disgruntled, thanks for that but what is Section 423?

Hi Disgruntled, thanks for that but what is Section 423?

http://www.legislation.gov.uk/ukpga/1986/45/section/423

Read it but I still don't understand what it means and what the implications are. Sorry, I'm not being obtuse but it's legal jargon.

Read it but I still don't understand what it means and what the implications are. Sorry, I'm not being obtuse but it's legal jargon.

You deliberately sell your house at a ridiculously low price. It is obvious you have done this to avoid paying the second charge. The creditor can apply to the court for an order to be made against you (and if I read the leg correctly, also the buyer of the house) under section 423 to have you, or the buyer of the house, pay off the creditor....

I'm not a subject matter expert here so best wait for the more knowledgable people to come along. I'm only parroting/paraphrasing the legislation.....

But essentially what you are proposing is fraud....

Read it but I still don't understand what it means and what the implications are. Sorry, I'm not being obtuse but it's legal jargon.

It means the law was made with your "hey, how can we stiff people out of what they are owed by selling stuff off cheaply" plan in mind.

It forsees "transactions at an undervalue" : where things are sold off for less than their worth with the intent putting assets beyond the reach of creditors.

Naturally, there is then a second limb to this, as you only get 52k, (and thus the 2nd charge holder only 2k), so you aren't any better off at the end, the creditor is 48k down, but the new owner of the property is up ... (your example makes little sense, BTW as if the house is worth 150k, and the 2 charges together are 100k, there is still 50k equity for you........).

So, lets change the example to the house being worth 100k. You sell it for 52k, the first charge gets paid off, the 2nd gets only 2k, and is 48k down. the new owner is 48k up (having a 100k house for 52k).

So, the 2nd limb is that the new owner is connected to you (or gives you a kick-back, that doesn't get included in your bankruptcy), right? Otherwise you wouldn't be planning it.......

But the law has seen such before, and is wise to it.

The affected creditor (or the trustee in bankruptcy) applies to the court, and gets the "transaction at an undervalue" reversed.

The buyer gets their 52k back, but loses the house (and any legal fees they paid out). The house gets sold by your trustee in bankruptcy, for 100k that goes 50k to the first charge holder and 50k to the second charge holder.

You still end up bankrupt and the 'buyer' doesn't get their windfall. You don't get the benefit of having made someone connected to you unjustly enriched (and/or don't get your kick-back).

For an insolvent company the liquidator / administrator can go back 2 years for transactions at an undervalue. For a bankrupt the trustee in bankruptcy can go back 5 years for transactions at an undervalue.

There is legislation preventing you giving preference to one creditor above others too, though the time periods they can look back over are shorter than for transactions at an undervalue.

Did you really think you were the first person to say "I have a cunning plan", and that such shenanigans hadn't been seen before?.

but is it against the law and what would the implications be if any

You know it is wrong. The law will be used to reverse such wrong doing. Don't try it.

Thanks for all the info guys.

Cunning plans sometimes work sometimes not, in this case it seems not.

Thanks anyway.

Baldrick & Blackadder often had a fruitless 'cunning plan'.

It is much simpler than that the 2nd charge holder would just block the sale in the first place as they aint going to get paid.

In short you cant do it.

Conveyancing solicitor would stop it too.

You cant force a third party(an entity holding a charge) into an agreement with an unknown partyto the charge holder. (your buyer)

In short you cant do it.

Conveyancing solicitor would stop it too.

 

You cant force a third party(an entity holding a charge) into an agreement with an unknown partyto the charge holder. (your buyer)

Entirely my point as soon as it gets to the conveyancing stage the buyer isn't going to obtain free title as the 2nd charge isn't going to be paid off and the sale simply collapses.

There really wouldn't be much point to securing a charge on a property if you could simply sell it and effectively negate the charge.