Advice please-Bankruptcy and home ownership etc

Pssst

I have a friend...yes its true...!!

I shall explain his situation. He and his wife have separated. They are joint owners of a property which may be worth about £100,000. One of them has debts of about £70k and the other about £50k. These figures include the outstanding amount of mortgage (divided by two) and the remainder of a loan secured on property (divided by two).

They have both decided to make bankruptcy applications.

The mortgage is currently in default and nothing has been paid on it for some months.

Now then,,I'm no expert in these matters but my view is that they may well not be granted bankruptcy as they both have a 50% stake in a property which might be worth £100k. Wouldnt the courts just say that they need to sell their asset (i.e the house) to allow them to repay a substantial amount of their debt? They seem to be of the view that they can just walk away from it and let the house get repossessed.

I have suggested that they make monthly payments to the mortgage company and enter into dialogue with them,thus buying time in which to hopefully sell the house.

Given the above situation,are they likely to be successfull in being made bankrupt (if you can call it success!) or will the insolvency service take the view that they need to sell the house which they own to help pay the debt?

ta

So_Sad_Angel

Hi P

If there are assets, then provided that residual debts can be serviced, technically they are not insolvent at this point. Obviously there is always a bigger picture.

I think referral to one of the debt charities CCCS , CAB , Nat Debtline is essential asap for both parties involved. To go BR any court/judge will ask what advice was taken & a full informed decision can be made.

Angexx

blind-as-a-bat_2

I agree although logic does not always follow and its a close call as there asset doesnt outwaigh there debt

Maybe they are looking for a simple way to break the ties, it may not be about money anymore, just a thought

peachyprice

If the house is worth 100K and their debts already 120K (70k + 50K?)then they are not solvent, they are in 20k of negative equity. Their 50% stake in the property is not theirs if they owe it all to the mortgage and s/l companies.

Therefore they are well within their rights to delcare BR and let the 20K shortfall be included.

Pssst

My logic was that legally they actually are the owners of the house. The mortgage company do not own it,they simply hold a charge on it. As they are the legal owners,they have assets of about £100k so i pictured the insolvency people saying..well you have 100k worth of assets,please realise them and clear a huge chunk of your debts and settle the smaller remainder by other means..yes i do think they are running scared and just burying their heads in the sand a little. I was just a little concerned that they both waste nearly £500 each on application fees and then be told their applications are refused because of the above?

tigerfeet2006

The only way they can find out for certain is to ring National Debtline or CCCS and get professional advice. Although collectivly we have a lot of experiance on BR matters it is not to be taken lightly and a debt charity should always be contacted. Please advise them to do so. Then if they suggest BR as an option we can help and support with any questions that come up.

peachyprice

Do you know how much the outstanding mortgage, the arrears and the secured loan come to? Is this the bulk of the 120K?

Selling the house will not allow them to pay of a huge chunk of their debts if they owe more than the house is worth on the mortgage and s/loan. If there is a shortfall they will also have to find that and will be further in debt.

Even if there is some equity left it has to be enough to pay off their mortgage, s/loan, all other debts, and selling costs, if they cannot cover ALL those costs with the sale of the house they are technically insolvent and can declare bankruptcy if they cannot meet the payments of their debts.

A judge would only refuse a petition if there was a large amount of equity in the house, and the debts and came to less, which is not the case in your friends circumstances.