Ask a CCCS counsellor a bankruptcy question

graceyb13

CCCS_Sue wrote: »

Hi Lisa and thank you for your message

It must be a very worrying time for you, especially if you are trying to sort this out on your own without any support.

Ideally, it would be better if you could discuss this with your partner.
You need to both sit down together and look at ways to resolve your debt situation, especially as he owns the property you are living in.

Depending on whether you have made any contribution to the running of the household, and how long you have been living there, you could be seen as having some beneficial interest in the property.
So, before you decide on whether bankruptcy is your best option, I would recommend that you call us for an appointment to speak to one of our debt counsellors about your situation. Although you have already used our Debt Remedy facility, there are some points you need to look at before going ahead.
These would include any expenses incurred from looking after your disabled child, which you say you have not included on your initial budget. The DLA would need to show as money for her special needs.

If you go bankrupt and you are living with your partner, then his share of the bills he pays would need to be shown in your budget.
Your tax credit debt could be included but if it is in joint names with your ex, then he is joint and severally liable. If you are not able to pay, then they will pursue him for the whole debt.

Do you really need four mobile phones? Could you cancel the contracts and just keep one?

I would recommend that you make an appointment to speak to our Debt Remedy client support team. You can call free on 0800 197 1704. Lines are open from 08.00 until 20.00 Monday to Friday.
If bankruptcy is your best option, then we do have a specialist bankruptcy team who can offer further help and support.

Hope this helps

Kind regards
Sue

Hi Sue and thankyou.

The house is in negative equity anyway and if we should get back together i wouldnt be able to pay towards any of his bills as i wouldnt have the income to do it. I have 4 mobile phine contracts but i do not use them all!!! They were got for other members of the family who couldnt get one in their own right. I just have the one phone!
I think what i will have to do is when and if we do get back together and i have contacted the relevant agencies to advise of this and they calculate what i am entitled to accordingly, i will then give you a ring. I work part time as a childminder but this too will stop should we get back together. we have many issues to resolve and he has stood by and helped with Bethany as if he hadnt she would have had to go into care. Obviously i dont want the bankcruptcy to affect his house as ultimately the debt i have, is mine! It wouldnt be the great beginning to a fresh start either "yes lets get back together but by the way the house will be under a bankruptcy order!!"
Im going to see if i can get the phones taken out of the other peoples bank accounts, they dont go out of mine. i give them the bill and they just pay it. Basically if we do get back together he will be paying all of the bills and i will be paying for my stuff. He has just paid off an iva early by offering a full and final settlement so discussing my situation with him when hes relieved himself of the stress he has had i just couldnt do it.
When i do phone up what will i need for you to help me, bank statements for how long? Benefit entitlement from when etc etc. Just so that i know as it takes a while to get things sorted with having to care for Bethany.
Many thanks

Lisa

graceyb13

CCCS_Sue wrote: »

Hi Lisa and thank you for your message

It must be a very worrying time for you, especially if you are trying to sort this out on your own without any support.

Ideally, it would be better if you could discuss this with your partner.
You need to both sit down together and look at ways to resolve your debt situation, especially as he owns the property you are living in.

Depending on whether you have made any contribution to the running of the household, and how long you have been living there, you could be seen as having some beneficial interest in the property.
So, before you decide on whether bankruptcy is your best option, I would recommend that you call us for an appointment to speak to one of our debt counsellors about your situation. Although you have already used our Debt Remedy facility, there are some points you need to look at before going ahead.
These would include any expenses incurred from looking after your disabled child, which you say you have not included on your initial budget. The DLA would need to show as money for her special needs.

If you go bankrupt and you are living with your partner, then his share of the bills he pays would need to be shown in your budget.
Your tax credit debt could be included but if it is in joint names with your ex, then he is joint and severally liable. If you are not able to pay, then they will pursue him for the whole debt.

Do you really need four mobile phones? Could you cancel the contracts and just keep one?

I would recommend that you make an appointment to speak to our Debt Remedy client support team. You can call free on 0800 197 1704. Lines are open from 08.00 until 20.00 Monday to Friday.
If bankruptcy is your best option, then we do have a specialist bankruptcy team who can offer further help and support.

Hope this helps

Kind regards
Sue

Also Sue i never paid the mortgage, council tax or upkeep of the house, i just paid towards the normal bills gas, electric, waterates etc. All the other bills were paid for by him, from his account which he can prove if necessary. Would there still be an issue of beneficial interest then? We have lived in the house for 8 years, 2 years not as a couple. He has always paid for all the house etc, ive never paid towrads the mortgage.

StepChange_Pavan

SteveABC wrote: »

Hi

Thanks very much for advice so far. I have a few more questions surrounding two scenarios I am currently considering. I need as much information as possible for me to make an informed decision about what I will do. The first (and preferred, I think) scenario is bankruptcy with a view to continuing to pay the secured debt to remain in, and keep my home. The second scenario is walking away from my home, finding rented accommodation, and declaring bankruptcy for the total debt (both secured and unsecured).

First scenario:

The house is in negative equity and I have had advice about the process of buying the beneficial interest off the Official Receiver, which I know is at his discretion. However, my secured loan payments are high and if the bankruptcy dealt with all the unsecured debt, I would still have difficulty paying the secured. If I took this route and:

(1) realised further down the line that I really couldn't pay the secured debt and I walked away and chose repossession, would I have to declare bankruptcy again, or would the resulting debt (i.e the negative equity once the lender was repaid from the sale) be added to the original bankruptcy debts?

(2) if the Official Receiver did not agree to the sale of the beneficial interest (I have already bought it following my estranged wife's bankruptcy) how much positive equity would the house need to return to for the OR to force a sale, and for how long would the OR look to doing that?

(3) one of the excluded items in the list the OR would not allow when considering if I could afford Income Payments is "excessive mortgage payments". If the OR decided they were excessive, where does this leave me, as I have to pay what I have to pay (if you see what I mean) - again, this returns me to the first point about affordability afterwards and having to declare bankruptcy twice. Is it possible to find out what is deemed excessive prior to bankruptcy, as it appears too late to be told afterwards?

(4) If I took this route, a family member has offered to help me to stay in my home by helping with part of the mortgage, which they would pay directly to the lender. I would not receive it as income, but would this complicate things as far as the OR is concerned? I could only afford to pay the mortgage with this help - otherwise, I think my only option is the second one, below.

The second scenario is losing my home and declaring bankruptcy for everything. I have had some information about this, but need really, to confirm the order I would have to do things. Please could you confirm:

(1) I would have to "walk away" from my home first and secure rented accommodation (i.e prior to bankruptcy)

(2) Then go through the bankruptcy process as soon as possible, - declare myself bankrupt and include all the secured and unsecured debt in my petition.

(3) Then, as soon as I have been made bankrupt, write to the secured lenders to advise them of the circumstances and give them the name and address of the OR to deal with.

(4) Would I then be chased by the secured lenders, or would they, by law, have to deal with the OR only? The mortgage lender would get most of their loan back following repossession, but the second secured lender would not (this is where most of the negative equity lies). The second secured lender is First Plus and I've heard they can be quite ruthless. Would they pursue me in the period after bankruptcy, but before the house is sold? I am assuming the secured debt would become unsecured following this process and all be dealt with by the bankruptcy, but is that only after the house is actually sold?

(5) If I signed a tenancy agreement prior to the bankruptcy, could the landlord force me out if he was notified of the bankruptcy by the OR, simply for my bankruptcy status, even if I am paying rent payments on time? Does the OR do this as part of their work?

Finally, I'm not clear on the difference between the OR and an IP. If I engaged an IP, what do I gain? Does the IP then do all (or part) of the work of the OR?

Sorry to ask so many questions, which I hope you understand. As I am considering two scenarios, it seems to get more complicated and leave me with further questions the more I think about them.

Many thanks.

Hi SteveABC and thanks for your post.

Broadly speaking, if you are unable to meet the mortgage payments by yourself at this stage, it may be better to look at the second option as your family member may not be able to support you in the long term. It’s also more likely that the OR will see your mortgage payments as ‘excessive’ if your income and expenditure clearly shows that you are not able to maintain the payments.

If you start by trying to keep the house and then fall behind further down the line, the secured debt would not be included in the bankruptcy and you would still be liable for any shortfall.

If you decide to rent, any mortgage shortfall and the First Plus debt will be included in the bankruptcy so they can no longer chase you for the debt. The OR should deal with this.

With regards to renting whilst bankrupt, I’d recommend that you read the tenancy agreement thoroughly before signing. Provided that there are no clauses, and you maintain your rent payments there shouldn’t be a problem. And you are right that you would have to secure the tenancy before going bankrupt.

Because your situation is quite complex and there are a number of options available to you, I’d really recommend that you call our Helpline so that we can discuss this with you in detail over the phone. Like I’ve mentioned previously, we have a specialist bankruptcy team that will be able to support you through the process and answer all of your questions fully. You can call free on 0800 138 1111 and lines are open Monday to Friday 08:00-20:00

Kind regards,
Pavan

fermi

CCCS_Pavan wrote: »

If you start by trying to keep the house and then fall behind further down the line, the secured debt would not be included in the bankruptcy and you would still be liable for any shortfall.

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

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

Answer: A debt which 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 you continue to live in the property it is likely that you 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 you have been discharged, as you are released from the debt on discharge.

Your bankruptcy does not affect the obligations of any 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 you to sign a "deed of acknowledgment" of the outstanding debt. If you have signed such a deed the mortgage loan creditor can take action against you to recover any shortfall following the sale of the property.

Especially given the latest guidance to the OR, where they are not normally going to offer purchase of BI, look at early re-vesting, or deal with the interest in a property until the 2 years and 3 months mark.

Last time I checked with the OR technical section, they were also adamant that purchase of any BI for a nominal sum does not prevent any future shortfall from being covered by the bankruptcy. At first look, a bit counter intuitive perhaps, but there you go. Many things are.

StepChange_Pavan

graceyb13 wrote: »

Also Sue i never paid the mortgage, council tax or upkeep of the house, i just paid towards the normal bills gas, electric, waterates etc. All the other bills were paid for by him, from his account which he can prove if necessary. Would there still be an issue of beneficial interest then? We have lived in the house for 8 years, 2 years not as a couple. He has always paid for all the house etc, ive never paid towrads the mortgage.

Hi Lisa and thanks for your post.

It’s difficult to say whether you have any beneficial interest, although it sounds as though it would be quite minimal if you do. However, your partner could be given the option to buy this from you for £1 + fees if you have any interest in the property.

We’ll be able to discuss this in more detail with you when you give us a call. There may even be other options available to you, but if bankruptcy is still your best option, our specialist bankruptcy team will be able to support you through the whole process.

When you call, you’ll need to have details ready regarding your income, expenditure and creditors, as this can help speed up the referral process. If you have bank statements for the last few months, it should have most of the information that you need.

Hope this helps.

Kind regards,
Pavan

StepChange_Pavan

fermi wrote: »

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

Especially given the latest guidance to the OR, where they are not normally going to offer purchase of BI, look at early re-vesting, or deal with the interest in a property until the 2 years and 3 months mark.

Last time I checked with the OR technical section, they were also adamant that purchase of any BI for a nominal sum does not prevent any future shortfall from being covered by the bankruptcy. At first look, a bit counter intuitive perhaps, but there you go. Many things are.

Thanks for the clarification Fermi

SteveABC: You would be liable for the shortfall if you had signed the deed of acknowledgment.

If you do decide to call us, we will go into this in a lot more detail.

Kind regards,
Pavan

fermi

CCCS_Pavan wrote: »

Thanks for the clarification Fermi

I would just note that it's based partly on what the Insolvency Service Technical section have told me.

They have sometimes, although not often, been wrong in the past.

So I think the normal caveat applies. On something as potentially significant as liability for a mortgage shortfall, it's essential to seek some professional independent legal advice to confirm your position.

fermi

Also, carrying on from what I said in the previous post, I assume that you are all now aware of this?

Dealing with beneficial interest from 1st Jan 2011

JoshJ

I was made bankrupt in April 2010 and discharged in October 2010 and need adice on what I should do next?
Will I be able to apply for a mortgage or loans or will I have to wait until I finish making payments to Official Receiver?

Tron1977

Hi there! I was sequestrated in Feb '10 so Im due to be discharged next month. The house I lived in was mortgaged and had a secured loan and so had negative equity so wasnt touched in the bankruptcy. My wife and I split and we signed a voluntary surrender form for the prperty in Nov '10. Neither of us has heard form the bank and I was wondering what happens to the outsatnding debt if the house isn't sold on before I am discharged. My trustee told me last year that any money owed after a repossesion/surrender would go towards the sequestration and would be written off. But I am concerned that the house will not be sold till after I am discharged and then I get a bill for thousands which I will not be able to pay and I will have to be made bankrupt again. Any advice would be greatly appreciated!:)

p.s. I forgot to say I'm in Scotland!