Vol Repo V selling yourself?

dalip

Now i am totally confused. I thought you bought the BI smiales on your house,so how does that affect things!

The way it reads to me is anybody who has gone bc can decide they no longer want their house,so 12 mths later they get it repossessed and owe nothing. No disrespect to you smiales but that seems a little "unfair".D

Merry_Gentry

My understanding is that if you buy the BI then the house is yours but if you sell it later at a deficit the deficit is not included in the bankruptcy.

dalip

Yes thats what i thought. Now i am getting totally confused. Time for a beer i think:D merry.

RichOneday_2

smiales wrote: »

I see your point completely but because the house was in negative equity at the time of br I think we should be covered.

Yes I agree that you would think contacting the OR/IS would be the easiest way to get an answer but the relationship I have with my OR is terrible so don't feel I can talk to them and the IS has answered an anonymous email (no names seemed like a good idea!) saying that the shortfall is covered.

I feel that I may be a guinea pig on this one as no one else seems to be in this position on the forum. Obviously it will be a nightmare if it doesn't go our way but I'm not sure where else I can get definate advice?

How did you word your anonymous question to the IS?

I just can't see how this will be included in the bankruptcy. Negative equity isn't a debt as such, although it could have been crystallized into the bankruptcy if you had lost the house at that time.

smiales

It wasn't actually me that sent the email but I have the reply here for you to look at which came back from the IS.

I was thinking about my reply to you on my way to work this morning and felt
that I had been a bit short in my reply.

As a way of covering your question more fully I would add that the buying
back of the beneficial interest makes no difference to the debt owing to the
secured creditor. The benficial interest is the bankrupt's interest in the
proceeds of sale of the property. If there are any amounts owed on mortgages
or other loans secured on the home, these would be repaid first from any
proceeds of the sale. The bankrupt's beneficial interest is calculated after
deducting these amounts. If there is going to be a shortfall on the sale of
the property the bankrupt's beneficial interest is nil. This is why the OR
will allow the beneficial interest to be bought back for £1 plus the OR's
legal costs in such cases. I hope that if you look at it in this way you
will see how the secured loan and the beneficial interest are completely separate issues.

So thats what I am working on at the moment, it has been a very confusing time but the way this message reads it seems that what I am saying is the case however fair or unfair. Like I said before, I'm not 100% sure things will work out as above but if I can't trust the advice of the IS who's advice can I trust?!

RichOneday_2

To me that is just an explanation of the situation on bankruptcy day.

I'm still finding it very difficult to see how a future shortfall can be covered by the bankruptcy.

smiales

Maybe it would help to see the whole message sent to the IS, I hope the initial writer doesn't mind me passing this on to the forum...

Hello.

It is clear that if someone goes bankrupt and intends to allow their house to be voluntarily repossessed, then any shortfall against the mortgage is a debt that would be included in the bankruptcy.

The question is, how long does this remain the case for?

If someone went bankrupt with the intention of keeping up the reasonable mortgage payments and after discharge finds that they cannot, can they still allow repossession and include the shortfall even at this late stage?

How (if at all) would the purchase of any beneficial interest effect this liability?

Many thanks.

Reply....

Thank you for your email today.

Please note that the Insolvency Enquiry Line of The Insolvency Service deals
with general, not case specific, queries relating to insolvency, as it is
not in full possession of the facts of each individual case and cannot
provide advice, only information.

I can tell you in general terms that a debt that is secured by a mortgage or
a charge on a property is still a provable bankruptcy debt. The mortgage
loan company is "a secured creditor" which means they have rights over an
asset, the house, and can require the asset to be sold to pay their debt.
These rights are not affected by the bankruptcy.

On the making of a bankruptcy order the mortgage loan company could make a
claim in the proceedings but, unless it wished to give up the security,
could only claim for any (estimated) shortfall.

If a bankrupt continues to live in the property it is likely that they will
continue to make payments to the mortgage loan company to avoid the property
being re-possessed. When the property is eventually sold any shortfall to
the mortgage loan company is still a provable debt in the bankruptcy, even
if the person has been discharged, as they are released from the debt on
discharge. There is no time limit on this.

The bankruptcy of one joint owner does not affect the obligations of any
other joint owner who has not been made bankrupt to repay the mortgage loan
debt or any shortfall, as they are still liable for the whole of the debt.

After the date of the bankruptcy order the mortgage loan creditor may ask a
bankrupt to sign a "deed of acknowledgment" of the outstanding debt. If the
bankrupt signs such a deed the mortgage loan creditor can take action
against them to recover any shortfall following the sale of the property.
Accordingly, if requested to provide such a deed, the bankrupt may wish to
seek his/her own legal advice.

The purchase of any beneficial interest would not affect the situation.

I hope this is helpful.

So thats the story, make of it what you will....................

RichOneday_2

smiales wrote: »

Maybe it would help to see the whole message sent to the IS, I hope the initial writer doesn't mind me passing this on to the forum...



If a bankrupt continues to live in the property it is likely that they will
continue to make payments to the mortgage loan company to avoid the property
being re-possessed. When the property is eventually sold any shortfall to
the mortgage loan company is still a provable debt in the bankruptcy, even
if the person has been discharged, as they are released from the debt on
discharge. There is no time limit on this.


Well that is amazing - I am officially gobsmacked! So, on that reckoning even if it was sold in 2029 it would be covered by your 2008 bankruptcy. You live and learn. You could well have uncovered some important info here which could potentially change people's attitudes to keeping/losing their homes on bankruptcy.

On this basis, you may as well have a punt that prices increase and you get a lump sum after bankruptcy.

smiales

You're reaction is the same as mine and the other member's who helped get the info. I'm still dubious because once bankrupt I've been on edge about everything! All I can take from the info is that it looks like we might be ok, when we do it and all is settled we could end up back on our a**es or we could be free and starting fresh!

RichOneday_2

It makes the answer to your initial question clear cut then if theres no equity about.

I dare say the lender won't be aware of this scenario though so will probably pursue the shortfall. You could end up feeling very smug at the end of it all, albeit unintentionally!