bankruptcy and mortgage

[seabro]

Hi,

 

My friends sister lives with her mum but owns a flat which she was renting out.

 

The flat is in negative equity and she is well behind with the mortgage payments. The mortgage company is proceeding for reposession which she doesn't mind because it is empty, in negative equity and too expensive for her to live in / keep.

 

If the bank repossesses the flat, and sells it, they will come after her for any shortfall - she also has a load of credit card and loans debt and is considering Bankruptcy.

 

She said she was talking to someone who said mortgage debt is not included if you go bankrupt so although the credit card and loan creditors will no longer persue her she believes the mortgage company will hound her for upto 12 years?

 

Any truth in this?

 

thanks

 

seabro

[fermi]

They are half correct in one respect, but very wrong in another.

 

Bankruptcy does not prevent a secured creditor enforcing there security against the property, even after the bankruptcy.

 

However, should there be a shortfall then this debt would fall into the bankruptcy.

 

This is obliviously the case if the shortfall is produced before the bankruptcy, because at the point of the bankruptcy it is effectively an unsecured debt.

 

However, it is STILL the case where the shortfall is realised some time after the bankruptcy.

 

See the official information from the government Insolvency Service.

 

Link: If my house is sold sometime after the bankruptcy order is any shortfall on the mortgage still a debt in my bankruptcy?

 

...

[seabro]

Thanks a lot fermi.