repossession - bancrupty - Northern Rock

sharraie

hi

We have just come to the end of our Northern Rock fixed rate and our payment on Interest Only has increased by £400 per month. We just cannot afford this. I have been to citizens advice who say "don't pay mortgage and see what happens" uh???? The houses are not selling in this area unless we go for negative equity, and with a secured loan on the house as well this is not good. My question is - do you get made bancrupt if you have your house repossessed..... We are lucky as we do have somewhere to go, but we do not want to be made bancrupt. help please !!!!!!

happybroker

If you are in negative equity you will be persued by the bank for the shortfall when your house has been sold. They could try and make you bankrupt for this amount if you refuse to pay up though they don't always take this action.

Speak to the bank, the advice from the CAB is a nonsense!! Maybe you got the cleaner or something but I can't believe they would tell you something like that, pehaps it was being filmed for a comedy show.

The bank may not be that forthcoming initially and will do everything to try to get you to pay but if you can't, you can't (I presume you have looked at every other avenue, 2nd jobs, selling cars, getting rid of sky, broadband phones etc).

Good luck, I hope it works out for you

sharraie

many thanks for your reply. I was also thinking along those lines, but if we don't have the shortfall, what can they do. My husband already works 60 + hours in his job, and I work 45 hours, plus we have the kids, so second jobs not an option. We have streamlined as much as possible, but with increasing utility bills, seem to be on a losing battle.

HelpWhereIcan

sharraie wrote: »

many thanks for your reply. I was also thinking along those lines, but if we don't have the shortfall, what can they do. My husband already works 60 + hours in his job, and I work 45 hours, plus we have the kids, so second jobs not an option. We have streamlined as much as possible, but with increasing utility bills, seem to be on a losing battle.

As has been said, they can make you bankrupt. This may not actually get them any more money but will make it difficult for you to get credit for 6 years after discharge.

Before you stop paying the mortgage you should explore all other options - starting with talking to NR and seeing if they will transfer any shortfall to an unsecured loan.

I take that the reason you have no thought of remortgaging to another lender is the fact that you think there is no equity in the property. How sure are you of this - there has been a certain amount of scare-mongering about the price that houses are selling for and it could pay to have a word with a broker who should be able to get a good idea of what your house would be valued at as part of a remortgage.

If not, it could pay to rent the house out to help cover most of the the mortgage costs while you rent another, cheaper property until you are able to sell. Have a word with some letting agents to see how the figures work out (if at all).

There have been a number of posts recently where CAB have advised people to stop paying their mortgage or to go for voluntary repossession and I am frankly shocked. Both amount to the same thing - a severely damaged credit file (even without bankruptcy) and a bigger shortfall than would be built up if you were able to rent it out and sell the property in your own time.

It may well be that selling the house at a loss is the only way out and if NR will not switch the shortfall to an unsecured loan you would be better to try and get a loan through the 'normal' channels such as your own bank, family etc etc than go through a repossession (voluntary or otherwise).

Even if you hand the house back you will still owe the shortfall, all the outstanding mortgage interest, all the lender's legal and selling fees and the shortfall is likely to be much bigger as the property is disposed of as quickly as possible.

good Luck

Trollfever

Advice from CAB on mortgage arrears:

http://www.adviceguide.org.uk/index/life/debt/mortgage_arrears.htm

monday_blues

hi, sorry you are in this position.

have u tried phoning the lender and asking them to lengthen the term on the mortgage to maximum (just until things improve) and to convert to interest only, even if they´re not keen, its better than u not paying mortgage at all, if they refuse ask them if you can convert a percentage of the mortgage to interest only just for a year or two.

like helpwhereican suggested, rent the property out, just to cover mortage, or if you fancy buying a new house, approach some housebuilders and see what offers they have, they may be able to offer you assisted move package where they will pay your estate agents fees, and everyone is commited to find you a buyer within a certain number of weeks. the builder needs your house to sell, therefore they will be pushing the estate agent also. as times are hard for the housebuilders too, rest assured they will also be offering cashbacks on the new houses they are selling (i am ex sales exec for new build) so you could potentially get
the sale you need
estate agency fees paid
potential legal fees and-or stamp duty paid
cashback on new build which could go towards covering negative equity

if youre not keen on new build, still search housebuilders as they will no doubt have second hand houses that they bought for part exchange purposes, that they will now betrying to sell, and the same incentives apply.

or a straightforward part exchange deal, but most of the time the builder insists that you are trading up in terms of value, not sideways or down.

good luck,

silvercar

Worth clearing up the differences between bankruptcy and repossession.

repossession

Get repossessed and the lender sells your property and clears the mortgage and gives you any excess back, after their charges. Your credit rating has a big black mark.

Get repossessed with negative equity (ie the sale price doesn't clear the mortgage and charges) and the bank will come after you for the shortfall. Normally they will give you a few years to get back on your feet and then pursue you. After this time, interest and costs will make the amount owed much, much larger. Once they find you, they can demand money forever.

Repossession doesn't automatically lead to bankruptcy, in fact lenders are unlikely to make you bankrupt (unless you have other assets) as the amount owed would be written off in bankruptcy.

Bankruptcy

In bankruptcy all your unsecured loans are written off, your secured loans remain. People can and do choose to remain in their home if they can continue to afford their mortgage and secured loans. This can be easier if the unsecured loans have been written off. There is a complication with the ownership of the equity in the home, but I won't go into that now.

One consquence of bankruptcy is that all unsecured debts are written off. Obviously a mortgage is a secured loan, but if repossession occurs, before or while you are bankrupt, the property is no longer owned and so the debt is not secured. It is therefore written off in bankruptcy.

For someone repossessed and bankrupt this has the major advantage of writing off the negative equity and gives the real opportunity of starting again. Accepting that credit rating will be heavily damaged for a few years.

Obviously bankruptcy and repossession are something to be considered seriously and with more advice taken than in internet forum.

nomoneytoday

monday_blues wrote: »

stuff

How on earth does that solve the problem???
All it does is prolong the issue and make it a bigger one downstream

Instead the OP will have a larger mortgage and will have simply wrapped up the debts differently..!

Dan_Collins_2

Can you go interest only until you get sorted?

geoffky

you need to contact one of the FREE debt charity's..and quick before you make a rash decision.....

arkie

Ask the CAB to put their recommendations/advice in writing. If you did choose to go bankrupt it would be unlikely that you would lose your house. I have dealt personally with people in your situation and they havent lost their house.