is this a loophole?

dankerrysmum

hello,just wondered what you guys thought about this?
firstly we live in scotland so that might make a difference
my oh is thinking of br ,he has a mortgage and secured loan of 84k and the house is valued at 120k ,i understand that the or would force a sale to release the equity say 36k,so there fore is it not in his best interest if he wants to keep his house to get that equity out eg with a secured loan and say spend it legitmately on house repairs .then if there is no equity he just has to pay what is it ? £1.00 plus costs?
he has a lot of unsecured loans and would like to go br as he has no way of paying them,but as long as he kept up with the secured ones surely his house would be safe from the or?
also are there any other ways of getting that equity out other than taking out more secured loans ?i am not sure if any loan company would lend to him now anyway.i was thinking could he sign away any eqity to a family member?
just a thought ,any ideas on how he could keep his house would be much appreciated

blind-as-a-bat_2

dankerrysmum wrote: »

hello,just wondered what you guys thought about this?
firstly we live in scotland so that might make a difference
my oh is thinking of br ,he has a mortgage and secured loan of 84k and the house is valued at 120k ,i understand that the or would force a sale to release the equity say 36k,so there fore is it not in his best interest if he wants to keep his house to get that equity out eg with a secured loan and say spend it legitmately on house repairs .then if there is no equity he just has to pay what is it ? £1.00 plus costs?
he has a lot of unsecured loans and would like to go br as he has no way of paying them,but as long as he kept up with the secured ones surely his house would be safe from the or?
also are there any other ways of getting that equity out other than taking out more secured loans ?i am not sure if any loan company would lend to him now anyway.i was thinking could he sign away any eqity to a family member?
just a thought ,any ideas on how he could keep his house would be much appreciated

That is simply an abuse of the BR system, i do not mean to be judgementel, i understand you wish to keep your home, but there is no other way to describe it.

If you wish to exploit that route it is up to you, but i would pose the question would your equity clear the non secured debts?

if so i think you miss the defenition of insolvent, your not!

DON79

Hi dankerrysmum

not sure if it makes a difference in being in scotland, but signing away equity to a family member is a definite no! with the OR in england, I don't think it will be too different in scotland. It would still be viewed as disposing of an asset in order to avoid it being seized.

Taking another secured loan may not be a good idea either - what happens if the payments drastically increase in the future and it can't be afforded? And it will be difficult to get a lender in these times unless you still want to pay extortionate interest rates unfortunately.

And the OR (in england) would question why, if you can get a secured loan, you did not use the funds to settle the debts that are owed? Are the debts more than the 36k equity in the house? And is this estimate of equity up to date given the current market conditions?

The only legitimate way to keep the house (in england) is to have a friend or relative buy the beneficial interest after the bankruptcy or sequestration has taken place.

Hope this helps

Donna

tattiescone09

wow blind as a bat !!! i was just running the scenario past you ,no need to be so aggressive!!
worked hard for our home just want to try and save it

blind-as-a-bat_2

tattiescone09 wrote: »

wow blind as a bat !!! i was just running the scenario past you ,no need to be so aggressive!!
worked hard for our home just want to try and save it

Im sorry you took my post that way, i tried to make it not to sound so. (Obviously i failed miserably)

I do understand, i really do, but i cannot condone what you suggest, and i doubt anyone else could either.

I have been around here nearly two years now, and believe me if there was a way to protect your home, i would tell you.

Im sorry you took my post that way

tattiescone09

ok fair enough, it just seems crazy that people going br with neg equity seem to be better off at the end of br,so really it pays to be more in debt just seems to be rewarding people who have been more irresponsible borrowing to the max,anyway thats how it seems to me

tattiescone09

never thought i would be willing for our house to depreciate!!
but hey ,the way things are going with house prices could end up in neg equity soon

blind-as-a-bat_2

tattiescone09 wrote: »

ok fair enough, it just seems crazy that people going br with neg equity seem to be better off at the end of br,so really it pays to be more in debt just seems to be rewarding people who have been more irresponsible borrowing to the max,anyway thats how it seems to me

Thats BR for you, makes no sense whatsoever.

But what you class a sense depends on your situation, its all relative.

Still wont make any sense though

Something i have said for the past two years, but seems to fall on deaf ears

coolcait

Hiya dankerrysmum and tattiescone09

I didn't read blind-as-a-bat's post as being aggressive. It might have been hard for you to hear, but it was - IMO - an excellent assessment of how your trustee would look at the 'loopholes' you're putting forward.

You will find information on bankruptcy in Scotland on the AiB website: www.aib.gov.uk

If your partner (I take it that's tattiecone, given the wording of his first post on MSE?) owns property, he wouldn't be able to go for bankruptcy under the Low Income Low Asset rules (as you were proposing to do for yourself when you first came onto this site). So I would suggest that his first step should be to check out whether or not he would even be able to apply for bankruptcy under the Apparent Insolvency rules.

If he signs away the equity in the house to a family member, that would be classed as a 'gratuitous alienation', and his trustee would probably take legal action to have that overturned. I doubt if that would be a pleasant experience for the family member.

If he takes out a further secured loan on the property, the trustee might also challenge that through the courts too. That's assuming that he gets one in the first place.

If your partner goes bankrupt, it would be possible for a family member or third party to buy out the trustee's interest in the property.

In cases where there is no equity in a bankrupt person's property, I believe that the Accountant in Bankruptcy would be looking for a standard payment of £500, to buy out the Trustee's interest and cover the costs of the paperwork involved. If you have a private trustee, they may look for more, as their costs tend to be higher.

Keeping up with the mortgage payments will keep your house safe from your mortgage lender. It won't necessarily keep it safe from a trustee in bankruptcy.

Your partner has to take a long hard look at his finances, and decide what his situation actually is: can't pay, or won't pay. If he can't pay, then he's looking at bankruptcy or a Trust Deed. My views on trust deeds are well documented - and negative. So, for a more neutral view I would suggest that he seeks advice from CAB, National Debtline etc.

If he could pay, and is so desperate to protect his property that he is considering what you have called 'a loophole', but which others might consider an abuse of the bankruptcy system, then maybe he'd benefit from checking out the Debt Arrangement Scheme: www.moneyscotland.gov.uk

If you are looking for advice on bankruptcy etc, it might also be helpful if you posted your full story in one place. If people know your full situation, that will help guide them when giving advice.

For the record, I applaud baab's post. I've often thought that I see Martin's admonition about 'this board is not for judgement' differently from other FMs. I cannot see how he would have intended it to mean that people should not say 'Hang on, that comes across as an abuse of the system, and the OR/Trustee would probably see it that way too'. If there was the slightest hint that this forum condoned that kind of behaviour, I suspect it could get Martin into pretty deep trouble.

tattiescone09

ok ,have i crossed the line here?
i was really suggesting the scenario of a loophole ,i wasn't meaning to be underhand or manipulate br in anyway ,do you not aggree though that the more secure debt you have against your house the more protection you seem to have against losing your home? when it comes to br and equity in your house ,it just seems rally unfair to me that someone who borrows to the hilt irresponsibly seems to be at an advantage.
i have been through the info on sequestration ,trust deeds and the das with a fine tooth comb .it is not a question of "won't pay "as you have put it ,the debt arrangement scheme is the more favourable option as we will have a small surplus ,but only if our creditors aggree to it and dont decide to make us br.
just to be clear i have changed my user name to tattiescone09 as the previous one was my kids names which i thought might not be the best idea.
lastly the reason i have not posted "my full story" is that it is still unfolding dailly and it would probably be too large to post!! also we are dealing with our debts separately as none of them are joint debts .

coolcait

tattiescone09 wrote: »

ok ,have i crossed the line here?
i was really suggesting the scenario of a loophole ,i wasn't meaning to be underhand or manipulate br in anyway ,do you not aggree though that the more secure debt you have against your house the more protection you seem to have against losing your home? when it comes to br and equity in your house ,it just seems rally unfair to me that someone who borrows to the hilt irresponsibly seems to be at an advantage.
i have been through the info on sequestration ,trust deeds and the das with a fine tooth comb .it is not a question of "won't pay "as you have put it ,the debt arrangement scheme is the more favourable option as we will have a small surplus ,but only if our creditors aggree to it and dont decide to make us br.
just to be clear i have changed my user name to tattiescone09 as the previous one was my kids names which i thought might not be the best idea.
lastly the reason i have not posted "my full story" is that it is still unfolding dailly and it would probably be too large to post!! also we are dealing with our debts separately as none of them are joint debts .

Hiya again

I have to agree with your decision to change your name. I do get very uncomfortable when I see people using their children's names on an open online forum.

I'm not sure I entirely agree with the idea that 'the more secured debt you have against your house the more protection you have against losing your home'. That would depend on you keeping up the payments, and it would depend on the attitude of your secured lenders. And - if you were in England or Wales - I don't think you would be quite so blase about that point (is it 'charging orders' I'm thnking of here? Hopefully someone will help me out on that point!)

Looking at your question in terms of bankruptcy, I personally would see a difference between someone who - for example - had borrowed 'x amount against their property when the market was at its height, but now finds themself in negative equity; and someone who deliberately borrowed further against their property, knowing that they had no intention of paying it back.

You will have to provide your definition of the slightly judgemental phrase "borrow[.] to the hilt irresponsibly".

To my mind, to be just as slightly judgemental :rolleyes: , if someone borrows £36k, secured on their property, which they have no intention of paying back because they are planning to go bankrupt; if they invest that money in 'improving' the property, which they have no intention of losing (and have admitted that the whole point of borrowing the £36k is to avoid losing the property); I would consider that might fall into the category of "borrow[.] to the hilt irresponsibly". A personal opinion. I might also find myself using words like 'fraudulent', 'abuse', and 'potentially challengeable in court' to describe those actions. Because I think that those are words which a trustee in bankruptcy would use if they were talking to you about this :eek:

If you are seriously looking at DAS, then you should be aware that - legally - your creditors cannot make you bankrupt just because you're thinking about DAS, have applied for it, or have not been accepted for it. In fact, parts of the DAS legislation specifically protect you from being made bankrupt by your creditors.

You might be getting mixed up with trust deeds. If you sign a trust deed, but it doesn't become protected because enough creditors don't agree with it, then a creditor, or your trustee in the trust deed, or you yourself, could apply to make you bankrupt.

Under DAS, if all of your creditors don't agree to it, the DAS Administrator can still overrule their objections and agree to allow you to go onto a Debt Payment Programme under DAS. So, if any of your creditors DON'T agree to it, you still have a chance to make your case to the DAS Administrator. If you could let us know roughly how much you owe, and roughly how much you could pay towards a DAS, then we might be able to judge how important it would be for you to get agreement from all your creditors.

I accept that your situation is evolving all the time - that's probably true for most folk who post here. However, if you gather together all of the information which you have posted across MSE, and put it up in one post on here, that would give FMs here an idea of how your situation looks right now. And that will help them consider the advice they give to you.