Help with Caution and charging order on house

[gramtrad2]

Hi All,

 

I have been struggling with debt for years and have battled on in order to retain my home, taking advice form Citizens Advice Bureaux, Christian charity , forums etc as needed.

 

I am self employed and, recently, my business has, again, floundered, causing me to struggle to pay my mortgage and other debts. Problems have been caused by people failing to pay me on time (like £7k 4 months late!!).

 

I have only a small amount of equity in my home and various organisations have forced charges on my property.

 

An organisation called New Zealand Home Bonds registered a caution on my house as part of the process of them guaranteeing a deposit on a new build flat that I was trying to buy in NZ in 2007. The property market collapsed, and the bond of some £24 was called in; I paid them two lots of £4k and have been paying some £200 per month, but the debt has not gone down much because they took the case to court in New Zealand and added on interest at something ridiculous like 13% pa!

 

Since they registered a caution on my property, a debt collector has put on a charge for £17k, followed by the bank for some £35k plus interest and a couple of others! So, I was paying out, each month - £200 to the NZ guys, £400 to the bank and smaller amounts to some of my other debtors.

 

When I was well off, the payments were no problem. However, now I am struggling.

 

The sensible thing to do would be to let the house go; there is 6.5 years left on an interest only mortgage and the property is unlikely to go up enough to cover the caution and the charges. However, I want to hang on for a few years to see my two children completely settled (they are both young adults and have just moved out, but they love their home).

 

Having taken advice I am minded to reduce the payments to the debtors down to a pittance on the basis that if they did start to kick off and demand the sale of my house - in all probability, the judge would not allow it as there is very little equity (house value £399k ; mort with arrears, £375k)

 

So, that is the background - now my questions

 

a. Does a caution on my property rank before a charge?

 

b. CAB have advised me that the bank and other creditors, by taking a charge on my house, have closed off their recovery options and cannot make me bankrupt at this point. Is this correct and, if so, does it also apply to a caution?

 

c. Am I correct in assuming that a judge would not allow a sale as long as I was paying something towards my debts each month.

 

Answers to these questions would assist me to develop my strategy for dealing with this matter.

 

Any comments from those who know what they are talking about would be appreciated.

[steampowered]

a. The general rule is that each lender's interest will be protected in order of registration. Assuming your mortgage lender registered its charge before the cautions, they will get paid first. The other cautions will get paid in order of priority. People have suggested on CAG recently that it is legally permissible for the conveyancer to pay you the money (after deduction of the charge) directly and leave the caution holders to recover the money from you by other means, but I think it is doubtful you will find a conveyancer willing to go along with that.

 

b. I don't know. I cannot think of any legal reason why this would be true but it would not surprise me if seeking both bankruptcy and a charging order is a breach of OFT guidelines. Hopefully someone else can clarify.

 

c. Yes. There are no guarantees in litigation but generally speaking a judge will be reluctant to grant an order for the sale of your home, especially if you are making meaningful progress towards paying off the debt. It sounds like the debt collector is the only caution holder who would get paid anything from the equity in the house, so he is the only one likely to apply for an order for sale, and it is quite unlikely that an order for sale would be granted over a 17k debt.

 

If your debts vastly exceed the value of the property, I wonder if bankruptcy or an IVA would be a viable option? Obviously there are disadvantages, but as long as bankruptcy would not sink your business it might be better to formally wipe off the debts and start again rather than keep paying towards them for years? I am not an expert in bankruptcy but my understanding is that generally people do not get booted out of their home or lose the tools needed for self-employment. I think it is worth discussing your options with an organisation like nationaldebtline.

[gramtrad2]

Many thanks; that is useful information.

 

I someone could clarify my point b, I should be grateful.

 

I will be looking at my options.

[steampowered]

Another thought: my understanding is that, in case of bankruptcy, if the house has negative equity the Official Receiver can allow you to remain in the property with a charging order for your existing creditors up to the value of the property. You (or a relative) can then buy the title of your house for a nominal sum. The result of this is that future increases in the equity value will go to you rather than your creditors. Obviously check this with a bankruptcy expert.

[gramtrad2]

Thanks. I have looked at this. What you say is correct to an extent.

 

My mortgage is quite large. I would probably be forced to sell on the basis that I could find somewhere to rent which would be cheaper and then pay more towards the bankruptcy.