Bankrupty and house/ mortgage

[ollandalf]

Hello all,

 

First post and worried sick is probably not a truer statement!

 

Our situation is as follows:-

 

House - Mortgaged 100k+ neg equity.... NO ARREARS CURRENTLY

 

Unsecured debt 144k --- from a mixture of business (guarantees) and personal - constantly being hounded.

 

Having read the wonderful supportive comments on the forum have decided from a combination of National Debtline, CAB and here that bankruptcy is probably our best way of having a fresh start.

 

My partner works for a bank and has been told by numerous sources that she will be dismissed if we go ahead and make ourselves bankrupt. However the thought of having 20+ years of people chasing us for every spare penny we have _ which isn't much_ and the fact our unsecured debt is 10 years of her salary, not including charges that will be racked up this may be the better option. (sense of irony here with the fact most of the banks have been here themselves!)

 

Our question is concerning our property and what may happen to it, and thus far no-one has been able to give us and firm advice. If the above happens. It is likely that we will just about be able to afford to pay our mortgage and bills on my salary alone. However, are worried that if interest rates take even 1% increase this may push our situation to the limit. Or even worse if I lose my job also which could happen I suppose!

 

If we are allowed to keep our house, with it's 100k negative equity - this may force us into bankruptcy a second time.

 

Will the OR deem that we cannot afford our house and take it into consideration in the bankruptcy, including any shortfall?

 

OR

 

Will he let us keep it and face the possibility that in a years time maybe 2 that we will face a mortgage shortfall of 100k, and a possible 2nd bankruptcy?

 

Try as I might I have not been able to find any advice either from the Insolvency service or any of the official help bodies, please if anyone has any experience of the situation can you please advise what is a likely outcome?

[debtinfo]

Bit of a tricky one. I would think that as the liability was incurred because of an action preceeding the bankruptcy (ie when you took the charge out) then if the debt later crystalized upon the sale of the property that it would be included in the original bankruptcy. When the property is transfered back to you it is the beneficial interest that changes hands not the liability for the mortgage which at all times remained with the charge over the property.

As regards your wife's job, have you asked the bank as only a small fraction of bank jobs would be affected by a bankruptcy, mainly ones that are directlt regulated by the FSA. Also if you intend to keeo the property is it a viable option for just you to go bankrupt and the wife not

[Louise40]

Also bear in mind that if your wife continues to work, that will more than likely give you more than £99 disposable income per month, resulting in an IPA, which could be upto 70% of your disposable income depending on how much you earn.

 

Re the house: we had the same issues, we couldn't get a clear answer, but I would work on the basis that the house will go, with that in mind we moved into a rented property before our bankruptcy.

[ollandalf]

Thanks for the replies.

 

My wife has been all the way up to her MD at the bank... they have said there is no precedent for people staying on who have make themselves bankrupt, and most actually resign prior since they are dismissed under a gross misconduct charge or as ACAS put it frustration of contract???... not something she wants on her record after several years at the bank being a top performer in her role...( she is not fsa regulated and purely in an advisory role)

 

Most of our debts are joint including the business ones sine we both gave personal guarantees. To be honest. We would rather the house go and we get a completely fresh start ... the way things are it could be a number of years before we get back into a positive equity situation. Just worried that if it does go that we would be liable for the shortfall after the bankruptcy. ie potentially a secong bankruptcy in the making. I suppose the OR will apply a common sense rule...???

 

Very stressful all this and your help is appreciated... Honestly...

[Louise40]

I don't know about the business debts but all your personal debts, even ones you may forget to include on the papers will be included.

 

Re the house, No you won't be liable for a shortfall altho your lender may try to get you to sign forms to say despite the bankruptcy you will still be liable. Our OR advised us to either cross out that paragraph or refuse to sign if they wouldn't accept amended forms!

 

We rented a property and moved into it before we declared ourselves bankrupt, like you say a completely fresh start.

 

I know how stressful it is, we still get the odd phone call now and again, at the moment HSBC don't seem to be getting the message and we still get letters via our old address but it is bearable knowing that we don't owe them anything.

[ollandalf]

Louise, how can we move out when we are not currently in arrears, won't that look dishonest? I am also worried about what happens to our income, does the OR take all our income and stipulate how much we can have for a rental property or do we decide ourselves?

Does the OR treat you like a person or are they horrible? We are also worried about actually going to court, what was this like?

Sorry for all the questions!

[Louise40]

I am not sure about the arrears/not arrears part as we were in arrears.

 

We did take some advice and the money we had allocated to pay our next monthly mortgage payment and the contribution towards the arrears was the money we used for our deposit and 1st months rent. For us it was about taking control back. We had time to choose were we lived and then moved in our time and then started our Bankruptcy.

 

We did seek advice, and was told that for our circumstances around £700 per month rent would be acceptable to the OR.

 

I would strongly suggest you seek independent advice too.

 

The OR isn't horrible altho he is quite formal.

 

We didn't actually go inot court, which was a blessing, the whole process took around an hour, however I must say my husband did 90% of our paperwork, he spent a lot of time liaising with the courts to ensure they were correctly completed and altho they can't advise they are very helpful.

 

Once the Bankruptcy was done we had a call from the OR the nexr working day and then he arranged telephone interviews. I did feel a bit like he was trying to trip me up, especially when he asked questions about my husband's finances and jobs, and I did tell him this and he then went into more detail and explained the reasons behind why he was asking the questons he was asking, it was all quite civil really.

 

He told us to expect an IPA and our finances would be reviewed this month July 2009, however since that conversation my husband has been made redundant (again!) and I am self employed (which means my work is hit and miss and probably will be at least until we are discharged as there is little incentive for me to earn more than £99 a month profit) so we don't expect to have an IPA which is a relief. To my mind that is extending the bankruptcy to 3 years instead of 1!

 

I hope some of this helps.

 

Louise

[toddle2u]

The sensible option seems to be to let the house go. If you decide this i would stop paying the mortgage now and use the money for a deposit and rent on a rental. When this is sorted file for BR and the mortgage shortfall will then be included within the BR.

 

My personal opinion is that it does not seem realistic to try to hold on to the house due to the large negative equity which, as you say, will take a long time to recover. Interest rates will rise and the potential of a 2nd BR within 2 years would not be good and really it would seem that you would simply be delaying the inevitable. Therefore it seems best to get it all out of the way now and have a fresh start.