Bankruptcy and shortfall

MichMoor

Hello All,

It seems in addition to my problems previously requested about bankruptcy I am now at increased risk of redundacy which is going to bring things to a head.

If it does happen I have agreed with my estranged wife we will allow the house to be repossessed (I am not living their at mo), there will be a shortfall. I am wondering if I go bankrupt when I am made redundant, to get rid of the personal debts which I am not going to be able to afford the payments being unemployed would the shortfall, when I know what it is be automatically be included in the bankruptcy, or will I have to go bankrupt again when it is known?

Your continued support is much appreciated!

philnicandamy

From the Insolvency Service:

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


Quote:
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.

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NOTE: Signing such forms before the date of your bankruptcy order does not effect your future liability. The original mortgage/loan shortfall liability and any that "might" have been acknowledged by signing such a form prior to the BR order, is a liability that is covered an extinguished by the BR order.

MichMoor

Thanks for the above, tho not sure I entirely understand, think your saying yes the shortfall should be covered by the bankruptcy, PROVIDING I have not signed anything that says I still accept liability, right?

skylight

Sort of - the liabilty will go into your BR estate. If you sign forms BEFORE BR then it still goes into the BR pot but NEVER EVER EVER EVER sign them after BR as it then won't go into the pot. This is basically because its then a new debt and not a mortgage debt when you sign for the shortfall and new debts after BR cannot go into the BR pot.

MichMoor

Thanks clear now.