Repossessed house mortgage shortfall, Ombudsman case

andyhm

Hi,

A long and painful story but I'll try and get to the point asap

Our house was repossessed when I went into bankruptcy back in 2006/2007 and the lender sold the property at approx £30k below market value leaving a £25k shortfall that my wife is liable for as it was in joint names.

We took this up with the Ombudsman and the case is still open with them - we have not paid a single penny of this debt.

The latest letter from the Ombudsman states that the lender has now waived the £9.5K Early Repayment Penalty they lumped on to the fees when selling the property leaving approx £15k outstanding. Good news you might think at first but I am not so sure....

1. We have no intention of paying ANY of this so called debt and will use Bankruptcy if we need to in order to clear the debt for my wife - so £25k or £15k makes no real difference to us - if it was £2k then that would be a different story.

2. Why have they done this 3 years on? Is it to make themselves look in a more favourable light with the ombudsman as we are getting close to a final decision from the Ombudsman? A cynical view? Maybe

3. Can they change a debt when it is being adjudicated by the Ombudsman? It doesn't matter if they change the value of the debt up or down - is it legal to do that?

Any thoughts would be appreciated

Trollfever

Did you manage to resolve this issue?

http://forums.moneysavingexpert.com/showthread.html?p=13600041&highlight=#post13600041

JA1000

Yes they can change, it's better for them to have something rather than nothing this was a fee and not part of the original debt. You still owe the debt so they will chase for it, the Ombudsman will close the case fairly swiftly if there has been some movement so be prepared.

£15k may seem a lot but in comparison to the rest of the debt it is a small % which you still owe.

VIGILANT22

Often people think that once they have left the house their liability ends. However, this is not the case if the house is sold for less than the outstanding mortgage. The debt that remains is usually referred to as a mortgage shortfall.

The Court of Appeal made a decision regarding this and they say the limitation period for mortgage lenders trying to recover mortgage shortfall debts is 12 years (Section 20 of the Limitation Act 1980).

Dan_1976

Hello OP.

The problem lies with the joint liability. As soon as you went bankrupt any unsecured debt in theory is wiped from the slate. Although not always as simply as that. The mortgage is secured, so does not fall within the bankrupcy as debt however the house does as an asset.

With negative equity they normally let you keep the property and review the situation over a period.

As soon as you are repo's the shortfall becomes unsecured and falls in to your bankruptcy. You are no longer liable. I think the repo may have to happen while bankrupt and not discharged.

However your wife is solvent so she is still liable for joint debt, secured or not.

She will be liable and I am not sure if you will get out of it, other than going br herself.

The insolvancy service or your or should help. I am surprised you have not be advised of this, I was and made my wife go BR. As you can imagine she was delighted!!

I hope it works out for you. Shout if you need anything, ex broker and bankrupt! LOL
PS. THere is a BR board in here.

andyhm

Hi

Yes, I think my wife will have to go down the bankruptcy route if they continue to push - unless the ombudsman finds in our favour of course!!
As you can imagine my wife can't wait to make that trip to the county court armed with £500 and all the bankruptcy forms.

Dan_1976

Out of interest, on what grounds will the ombudsman find in your favour?

FraudBuster

can't wait to make that trip to the county court armed with £500

The fees go up to £600 on 6th April.

Dan_1976

Always joining with goodnews FB!!

andyhm

When the OR had the house on the market they had 3 offers of £350,000 (none of which they accepted due to chains I think). We also had an independent valuation of £350k - the lender sold it for £310,000 which by my reckoning is way under sold.

Dan_1976

If you can prove the offers you have a case I think. Good luck.