House and bankruptcy

OliviaM

Hi,

My husband and I have almost reached the decision to go bankrupt, but I need to know something regarding our house (which we have a mortgage on) and I can't find the answer anywhere. You've all been so helpful in the past that I am hoping someone on here might know.

Because of the fall in house prices there is no equity in our house, but my mother in law is looking to buy a house and rent it out. She has said that she will buy ours from us and then rent it out to us. We'd make no money from the sale, she'd buy it for the cost of paying off the mortgage. My question therefore is, is this allowed under bankruptcy? If we sold before we filed for bankruptcy what could the consequences be? We need to stay were we are for my job and our daughter's childcare. Does that make any difference?
Thanks in advance!

Olivia

skylight

If there is no equity, no arrears on mortgage or secured loan payments AND you can keep up with the mortgage and secured loan payments, then you are usually able to keep your property in BR.

Do you have any secured loans on it? If so, how much?
How much is the property worth?
How much is the mortgage?
In arrears on any of the above?
How much does MIL want to buy it from you for? (Sorry - can see you have answered that one!)

If there are no secured loans or arrears on the mortgage, and its sold for mortgage value - as long as the mortgage value is the SAME as its marketable value, then there will not be a problem with the OR. The OR will only look at the sale if you have sold it cheap and in that case he can legally reverse the sale. Also bear in mind that there will be costs for selling - solicitors fees which you will need to find from somewhere.

The biggest thing to note though if you go ahead - is should you need to claim housing benefit (LHA) or council tax benefit in the future, because MIL will own the property, you will not be entitled to claim any benefit for it.

fiveyearplan

Skylight - why wouldn't they be able to claim housing benefit? It they are renting, does it matter who the landlord is?

OliviaM

Thanks for the reply!

The mortgage is at £152k and house hasn't been valued, but from other houses the same it would be about £160k. There is a "buy out" fee on the mortgage of 7k and the sols fees would be covered by the remainder.

No secured loans and not in arrears - the mortgage is paid on the day my wages go in to make sure it is the first bill paid.

MIL would charge us rent on the property - does that make a difference to the future aspects?

Is there anyway of knowing for certain that under BR they'd not take the house, or is it a case of having to wait and hope for the best? I'd rather sell to MIL if that was the only way of ensuring we could stay put.

fiveyearplan

The OR wouldn't want to sell your house now anyway because there isn't any money in it at present and would do no good to your creditors. In any event because you have a child they wouldn't do anything for at least a year and have 3 years in which to act.

Is that the only reason for MIL to buy the house - to safeguard it? If so I wouldn't think you have a problem keeping it yourself with the market what it is.

That is great that you have no secured loans and are not in arrears - I'd keep the house if it was me.

skylight

fiveyearplan wrote: »

Skylight - why wouldn't they be able to claim housing benefit? It they are renting, does it matter who the landlord is?

If you are related to the landlord, they normally wont allow you to claim. Its to help combat fraud apparently.

A small loophole though is that you can do this if the arrangement is a commercial one - so the landlord can provide full tax returns for their letting business and so on. In reality this doesn't really happen.

skylight

I agree with 5YP - I'd keep it.


Even a MIL landlord can evict you if she wants.........

OliviaM

Is there a minimum amount of equity that would be needed in the house for the OR to take it? I'm just thinking that our mortgage is £152k and the house is likely to be around the £160k value mark, because we're not in negative equity would that make it more likely that they would make us give it up?

DEBT_23

does mortgage arrears affect the OR's decision then wether or not to allow someone to keep it ???

spentit_2

I encountered a problem with HB after selling our house and renting back, My claim for HB was refused. apparently if you sell a property, you cannot get HB for five years. I think this may only applies if you remain in the property. We have since moved and got HB without a problem.

tillboy

DEBT_23 wrote: »

does mortgage arrears affect the OR's decision then wether or not to allow someone to keep it ???

Mortgage arrears count toward the balance so if you'r 5k in arrears the house would realise 5k less if sold.

You need to look at local rents too, if it's deemed excessive compared to renting locally they could cap the amount allowed for mortgage payments.

Obviously you need to be able to clear your arrears somehow too