Do I sell my property? Do I declare bankruptcy?

colin8

I would really appreciate some advice please.

My partner and I are currently expecting our first baby, due at the end of July. I became unemployed end of August 2008 and as a result became further and further in debt. I own my property, my mortgate is £96,000 and my property is currently for sale at £115,000. I also have a secured loan against this property (the biggest mistake I ever made!!) of £26,000 over a duration of 25 years (..if I pay the loan to its duration I will be paying back approx. £75,000!!). I recently had a statement of this account and I owe £27,000 - more than when I first took out the secured loan 3 years ago!! This is due to the extremely high interest and default charges over the past few months when I started to struggle paying the monthly premiums. I also have approx. £13,000 in unsecured debts such as credit cards/overdrafts etc.

I have had recent interest in the house and contemplating an offer of £112,500. The highest offer I have received since putting the house on the market end of last year! I am undecided as to the best action to take (that is as well if the secured loan company will agree to the house sale?). After the £96,000 is paid to the first lender plus house sale costs then the remainder I believe will be paid directly to the secured loan company. This I believe would then leave a remainder of approx. £14,000 of the secured loan (however, I believe on selling the property and renting elsewhere the loan then becomes an unsecured loan?) and the credit card/overdraft debts.

The house we live in is currently 1 bedroomed and we will, therefore, very soon need somewhere to live that has more space. An extension is possible but again we do not have the money to do this? I know this change would mean coming off the property ladder. I have also been strongly considering declaring bankruptcy? If BR is the way forward, then when is the best time to do this? Do I sell the house voluntarily first before becoming BR? What happens to the secured loan if I do declare bankruptcy?

I would appreciate any advice regarding the property sale, whether it is best to cut our losses with the house and rent somewhere larger, although my other concern is if I do declare bankruptcy what impact will this have on renting a property and when credit checks are made? There is some light at the end of the tunnel however, I managed to secure my job with my previous employer a couple of weeks ago, so I will be receiving a weekly income again. :j My partner will be going on maternity leave beginning of July. Her temporary contract expires end of July so although she will be entitled to SMP she will have a low income and not guaranteed a job to return to.

I hope someone can help offer advice as to what is the best action to take regarding our dilemma...

charliee_3

it sounds like an awful situation. i hope you are now being sensible and have cut up the credit cards and living within your means..
i dont really know how bankrupcy works, but i am sure for some people it is a great relief after years of worry.
If i were you i woudl make an appointment at the CAB and speak to a debt person there for advice. they will have seen it before. dont go to one of these debt management companies- i am sure they are a rip off...

i would say in any case that i am sure it is better if you sell the house privatley beforehand as if it gets repossed they probably wont get as much and you will still be liable for the shortfall...

with regard to renting they will do a credit check and will need proof of your income, so keep up payments in the meantime to not make it any worse and think about who might act as a gaurantor for you if needs be..

you could also speak to the council to see if they can put you on the waiting list for social housing. i presume you are not a massive wage as you are bieng paid weekly (sorry if this is a generalisation) so once your OH goes on maternity you may be entitled to extra help anyway??

have you posted his on the wannabe debt free board?

silvercar

First action is to speak to the secured loan people. You can only sell the property with their agreement to transfer some of the secured loan to an unsecured loan on sale. Otherwise you can't sell.

You need to take advice from debt counsellors. You are confusing (understandably) repossession with bankruptcy. You can do either without the other, but you need to understand the difference and what you are trying to achieve.

If the bottom line is you want rid of the house you have 2 options:

1. sell with the secured loan agreement, go into rented and make payment plans for all your unsecured loans (including the formally secured one);

2. sort out a rental property and do a voluntary repossession. ie hand the keys back. Risk here is that the secured loan lender will pursue you for the remaining debt.

If you are considering bankruptcy then any negative equity would be written off in bankruptcy if you give up the house. You could try and keep the house by keeping your mortgage and secured loan through bankruptcy as your other debts would be written off.

If you don't want the house, then the easiest way is to secure a rental property, then give the keys back, then go bankrupt. You do need professional advice for this.

Forget borrowing more to extend. You need to sort the debts you already have. ANyway with a bad credit record yu are not going to get any sort of loan at reasonable rates.

mlz1413

Get yourself to CAB and ensure you are claiming all the benefits you are entitled too, get advise from them on your whole situation.

It might be worth getting an IVA with the loan company (if possible) as the interest and charges added for non payment will only be making matters worse. There is a whole section on this website about IVA's and BR.

Go onto the other discussion boards for help on how best to manage your debts and be free of them.

Re the house sale you need to know if the loan company will allow it, if you can show that without the mortgage you will be able to make payments this will help.

PasturesNew

There is a board here dedicated solely to bankruptcy and decisions and options

http://forums.moneysavingexpert.com/forumdisplay.html?f=136

They will ask for your SOA, which is a list of in/out money stuff, which you can fill in here then copy/paste there:

http://www.makesenseofcards.co.uk/soacalc.html

Lotus-eater

Congratulations on the baby, I am having one at that time as well. The baby can live with you in your room for a couple of years no problem, so don't worry about that.

colin8

Thanks for the link to bankruptcy forum. Have posted my request for help and advice there as well..

GDB2222

This I believe would then leave a remainder of approx. £14,000 of the secured loan (however, I believe on selling the property and renting elsewhere the loan then becomes an unsecured loan?) and the credit card/overdraft debts.

The above is the key point in your post. It's a sort of mini-SOA. There are two things you don't mention:
a) How much the credit/overdraft debts are?
b) How much you can earn once your job starts again?

However, if it's clear to you that your net worth is substantially negative and you have no real hope of paying off the negative balance within say two years, you may as well take advantage of the very lax bankruptcy rules. That way, you get to start again without the burden of these debts. Your credit rating will be lousy, but I don't suppose it's exactly great right now, anyway, so you've not got that much to lose.

neas

IM sorry i have to make a slighty nasty remark ,it might put things in perspective.

You do not OWN your own home, the bank owns it and you pay them off until the end. The way I read it it, you owe more than your house is worth (mortgage and secured loan). If the house sold for your price you'd be left with 20,000 pounds worth of debt from credit cards and the remainder of secured loan.

People own parts of their home, like 50% if they have paid 50% of mortgage off. At the moment your home is a money pit and it might be best going down a bankruptcy path and living in a council house until you can re-save and get a little house somewhere.

moneysaver12

If you owe more than you house is worth the lenders won't let you sell it, my fiance tried to sell his house to find out that as he owed more than the house was worth because of securred debt he wasn't allowed to sell it, as a result he has had to do voluntary repossion.