Bankruptcy & Secured Debt - Question

pm844

Hi

Can anyone give me some help with the following situation:

Due to loss of employment, and subsequent new job on a much smaller salary (victim of the credit crunch!), our lifestyle is no longer sustainable and we are 5 months in arrears on mortgage, other bills and a number of loans (secured and unsecured) and credit cards. Also, our mortgage payment has increased by £200 per month following the end of a fixed rate deal, and due to reduced salary, lender is no longer willing to negotiate a new mortgage deal.

We are now facing bankruptcy, however have loans secured on the property which is now in negative equity. How does this affect our bankruptcy petition? I understand that secured debt is not affected by bankruptcy, however wonder if this will revert to unsecured debt on reposession of the property (lender has already begun proceedings)? And what about any shortfall in the mortgage - it will almost certainly sell for less than is outstanding on the mortgage.

We can afford a new life however if our payments on the unsecured loans must continue, this will not be the case.

fermi

Any shortfalls and costs would be included in the bankruptcy.

That applies whether the shortfall is realised before or after the bankruptcy.

Link: If my house is sold sometime after the bankruptcy order is any shortfall on the mortgage still a debt in my bankruptcy?

You must make sure that you don't sign any paperwork from the mortgage lender that re-admits liability for the shortfall.