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Mortgage, children and a husband threatening bankruptcy

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My sister has 3 children and lives alone with them in a mortgaged property. Her husband lives apart with his girlfriend. They are still married. He wants to bankrupt himself.

 

Can his creditors force the sale of the property to recoup his debts from the proceeds of the sale?

 

I believe he his still on the mortgage and they are still married.

 

Would the courts sanction such a sale considering the children would be exposed to insecurity etc?

 

Is her share of the equity in the property safe from his creditors?

 

I always thought bankruptcy extinguished all debts?

 

Obviously not

 

Thanks and regards

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It is possible that the insolvency service may order the sale of the home (is it in both your sister's and her ex's name ?) or just his.....however if there are dependant children it is unlikely they will and IF they do then you would be given at least 12 months to find alternative accommodation. I understand that you can also purchase his interests in the property too. It might be worth calling the insolvency helpline too (free, impartial and confidential) - http://www.insolvencyhelpline.co.uk/


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She needs to speak to someone, probably a solicitor that understands Bankruptcy Law.

 

I discovered recently, & this surprised me. If you own a property, which has equity, if you are contemplating bankruptcy, you can sell your share, normally to a family member that you trust for a very small price (£1), then when you are discharged, you buy it back.

 

If her husband is going to do this, he will need to instruct a solicitor. The solicitor should act in his & his families best interests, and should advise the best route with the minimum of upset. Even though they are seperated, even he must see that selling her his share, & securing the family home is an easy option.

 

Debs

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Hi Debbsy

 

So, you're saying my sister's husband (who are now separated but still married) can sell his share of the property back to his own wife to avoid his creditors getting their hands on the equity?

 

Is this what you're saying?

 

Is this legally possible?

 

Thank you

 

SD

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Hi,

 

I've sent you a PM.

 

Debs

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She needs to speak to someone, probably a solicitor that understands Bankruptcy Law.

 

I discovered recently, & this surprised me. If you own a property, which has equity, if you are contemplating bankruptcy, you can sell your share, normally to a family member that you trust for a very small price (£1), then when you are discharged, you buy it back.

 

If her husband is going to do this, he will need to instruct a solicitor. The solicitor should act in his & his families best interests, and should advise the best route with the minimum of upset. Even though they are seperated, even he must see that selling her his share, & securing the family home is an easy option.

 

Debs

 

Intrigued now subbing

 

 

Andy


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Hi,

 

I've sent you a PM.

 

Debs

 

Debs

 

Haven't rec'd your PM

 

will await

 

thanks

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This is really interesting (re: selling your share for £1 etc)

 

Is it therefore possible for me to sell my share to my wife for £1 and thus avoid a charging order for a debt in my name only? We've not got to the CO stage yet, I'm just planning in advance.

 

Our situation is that there is some equity, but she paid the (quite large) deposit, so most if not all the equity is hers anyway. Mortgage and house are both in joint names, she has no personal or joint debt, I have quite a bit of personal debt.

 

Thanks for the help.

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I think you are probably referring to S283A of the Insolvency Act 1986. This provides that a bankrupt's (or his spouses or ex-spouse if the bankrupt still has an interest in the house) dwelling house ceases to be part of his estate for bankruptcy (ie available for his creditors) after 3 years UNLESS the trustee sells the house, or obtains an Order for sale or possession OR [and this may be the bit being used here]

 

the trustee and bankrupt agree a specific liability to his estate in consideration

 

ie the bankrupt pays the trustee something for the house.

 

If the house is in negative equity, the trustee is unlikely to get an order for sale. It would just cost him money to go to court. In the past, the trustee could sit back and wait until the housing market improved but now he only gets 3 years to realise the asset. So it may make more sense to sell the house (subject to the existing mortgage) even for £1 since that is more than anything recivered from a house in negative equity. Of course, the house owner still has to pay the mortgage interest but that's the price you pay.

Edited by Docman

Arrow Global/MBNA - Discontinued and paid costs

HFO/Morgan Stanley (Barclays) - Discontinued and paid costs

HSBC - Discontinued and paid costs

Nationwide - Ran for cover of stay pending OFT case 3 yrs ago

RBS/Mint - Nothing for 4 yrs after S78 request

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What should be done if someone wants to buy my beneficial interest?

 

If an insolvency practitioner is handling your bankruptcy, your husband, wife, partner, relative or friend should contact the insolvency practitioner for information on what to do.

If the Official Receiver is handling your bankruptcy, your husband, wife, partner, relative or friend should contact the Official Receiver. If the home is jointly owned, they may be able to take part in a low-cost conveyancing scheme run by The Insolvency Service and a firm of solicitors. Under this scheme, the beneficial interest and the legal title can be transferred to your husband, wife, partner, relative or friend. Please note that they will have to pay:

  • for a solicitor or licensed conveyancer to act for them in the transaction;
  • £211 (as at February 1999) to cover the Official Receiver’s legal costs. This amount must be paid in advance. It includes an allowance for expenses which may be incurred in the transaction. If the allowance is not fully used, they will receive a refund;
  • the cost of an independent valuation unless you already have a very recent independent valuation of the property;
  • the agreed purchase price for the beneficial interest based on the valuation. If your home is now worth less than the amount you still owe on it, the price of the beneficial interest will be set at £1

The purchaser will also have to give the Official Receiver up-to-date details in writing of the amounts which would be needed to fully pay off the mortgage and any other charges on the property.

If your husband, wife, partner, relative or friend cannot afford the costs of the scheme at present, they may still be able to take part at a later date. They should contact the Official Receiver about this.

If at a later date an approach is made to the Official Receiver to purchase the beneficial interest, and the property has increased in value, it is likely that the purchase price will be more than £1.

If the home is mortgaged, the lender may have to agree to the sale - the solicitor or licensed conveyancer dealing with the transaction will be able to advise on this.

I personally cant see many lenders agreeing to this.

Regards

Andy


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Andy

 

thanks for finding this. It does look like it is possible but as I thought, the £1 price tag is where there is negative equity. However, if the mortgage has been kept reasonably up to date, the mortgage company may well allow the sale. They don't lose out. Indeed they gain because if they forced a sale with negative equity, they would be out of pocket. Most banks are more likley to want to continue to receive the mortgage interest payments.


Arrow Global/MBNA - Discontinued and paid costs

HFO/Morgan Stanley (Barclays) - Discontinued and paid costs

HSBC - Discontinued and paid costs

Nationwide - Ran for cover of stay pending OFT case 3 yrs ago

RBS/Mint - Nothing for 4 yrs after S78 request

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You cannot just sell your assets for a nominal sum and then go bankrupt - the OR or IP would have something to say about that.


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Well Guido the above I posted is direct from the the Insolvency Webby.

 

 

Andy


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GuidoT

 

The idea is that the bankrupt provides some money AFTER he is made bankrupt for an asset that would revert back to him after 3 years. The OR or IP are the ones who want to do these deals but the sum of £1 is only if there is a situation of negative equity.


Arrow Global/MBNA - Discontinued and paid costs

HFO/Morgan Stanley (Barclays) - Discontinued and paid costs

HSBC - Discontinued and paid costs

Nationwide - Ran for cover of stay pending OFT case 3 yrs ago

RBS/Mint - Nothing for 4 yrs after S78 request

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She needs to speak to someone, probably a solicitor that understands Bankruptcy Law.

 

I discovered recently, & this surprised me. If you own a property, which has equity, if you are contemplating bankruptcy, you can sell your share, normally to a family member that you trust for a very small price (£1), then when you are discharged.

 

If her husband is going to do this, he will need to instruct a solicitor. The solicitor should act in his & his families best interests, and should advise the best route with the minimum of upset. Even though they are seperated, even he must see that selling her his share, & securing the family home is an easy option.

 

Debs

 

 

 

 

I understand about the £1 for no equity point and that is fine, what I am saying in post 13 is in response to the posts above that think you can pay a £1 when there is equity in the property and then subsequently buy it back after discharge.

 

 

My post above refers to assests, clearly if there is no equity it is not an asset and thus paying a £1 will not bother the IP or OR.

Edited by GuidoT

If I have been helpful please click on my star and add a comment.

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