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Hi,

I have an flat in UK which is in huge negative equity. I moved to US a few years ago. I am not able to pay the mortgage anymore and I am planning to give the keys back to the bank and apply for bankruptcy.

I understand that mortgage is a secured debt. Can I apply for bankruptcy based on the negative equity on the mortgage? Will that be written off in bankruptcy?

Or should I wait for the bank to sell the house and send me a shortfall notice before applying for the bankruptcy?

 

Thank you very much in advance.

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If you have debts of more than £750 you can apply for bankruptcy, the flat will be included as an asset and sold. If there is a shortfall that will be included in the bankruptcy.

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Hello there.

 

if the property is in negative equity it will not be sold as part of the bankruptcy. Properties do, however, vest with the official receiver/trustee within a bankruptcy - which means that you may not be able to dispose of it whilst the bankruptcy is in place. The general rule is that the OR/Trustee has three years in which to dispose of the property, if the house is significantly in negative equity they are likely to either state from the off that they are not interested in the property or to simply hand it back to you after the three year period.

 

If you had back the keys any mortgage shortfall would automatically be included within the bankruptcy once the house has been sold on. Whatever you do, do not sign a 'deed of acknowldgedment' given to you by the lender - this has the potential to make you liable for the shortfall debt once more after the bankruptcy.

 

When did you actually move to the US? There could be potential issues with how/where you petition for your bankruptcy. Will you ever return to the UK?

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@sequency: Thank you very much for the information. I moved to US in May 2010. I am not planning to return to UK. Other issue is whether the bankruptcy will affect my credit in US and whether the OR or the court would inform my US bank or employer about the bankruptcy. Information I found on these issues have been varied. I also heard that the bank can sell the debt to US company who could chase me here in US, and this is worrying.

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It wouldn't affect your credit it the US. I really don't know the answer re: the OR but I can *try* and find the answer for you.

You could be chased in the US for the debt but I'm not certain any legal action can be brought in the US as the UK doesn't have a reciprocal agreement with the US for that sort of thing.

 

Each to their own but if I have moved to the US with the intention of staying there I wouldn't do anything about any debts I had in the UK.

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Until now, the bank did not know that I had moved to US. I had a correspondence address in the UK.

I am going to inform the bank that I am not able to pay the mortgage and give the keys back. Do you think I should let them know that I am in the US and give them my US address? Or is it better to withhold that information?

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Could you set up a post office box in the UK to receive mail and have it forwarded on to you ?

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No I cant. Royal mail website says I have to be resident in UK to set up a PO box and I will have to show proof of address, less than 3 months old.

Wondering whether giving them my US address will make it easy for them to chase me?

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