House in BR

toasted

I have not seen this answered anywhere. I am three months into my BR.
I had a large mortgage on my house and the value has been sinking for the last two years. The receiver seemed happy to leave the house alone since there was little or no equity. I was happy at that since it disrupted my family to the least degree.
I have so far found BR to be an huge relief, no more looking over my shoulder and in Northern Ireland I have plenty of company, since so many have been wiped out in the collapse of property prices. Thus the stigma of BR is not as bad as it might have been.
Now as I realise life is not as bad as it could have been, I realise that my house may be worth £200k less than the mortgage that I have on it. This leaves me with a worry. I like the house and I can probably afford to pay the mortgage at the current level. However is there any point in continuing to pay this mortgage since I am just saddling myself with a debt that is £200k more than the value of the house?
How do I handle this? If for example next year I realise that I can't afford the mortgage, the mortgage bank could I presume try to sue me for defaulting, and BR me again.
At the same time the mortgage bank may find it better to sell the house to someone else in my family for a more reasonable rate. Is that the best way forward? Has anyone else done this?
If I decide to simply move out, when can I do this without creating a situation where the mortgage shortfall is not part of the BR?
Any advice is appreciated.
Thanks.
Paul B.

tech2_2

The house is declared in the BR as it is now! As you will have had to have the house valued to prove the neg equity!

You can come out of BR and then if you decide to chuck it stay in the house and pay no monies to the Mortage company save the cash let them get to the repo stage and then hand the keys in and walk away! (someone on here will say if I am wrong but i dont think so)

You will have a shed load saved from not paying!! and you may be able to prolong that as in the UK they can not serve repo unless there has been no payment made in the last 6 or 9 months consec. So I would not worry at all and see what other say

Tech 2

toasted

Thanks for the advice. That may prove to be the best way forward since if I leave I have six to nine months mortgage cash, and if a family member buys it would at least bring the mortgage company to the negotiating table perhaps. I must admit I was so far in the red, £400k to the revenue for a start, that I didn't involve myself in the detail of the BR too much. The lady at the IS that is handling my case isn't the most communicative either. The mortgage bank is not aware of the BR as far as I am aware, so I will let things sit until next year.
Thanks again.
Paul B.

silvercar

I don't think it is that simple.

Either you remain in the house and have the responsibility of paying the mortgage and then a family member can buy the beneficial interest (BI) off the OR. The cost would be £1 plus a few hundred legal fees if it is in negative equity. This gives you the house and the current mortgage.

Or you walk away from the house and the negative equity could be included in your bankruptcy. (I'm not sure on timescales, I would guess you would need to do this within months, to show that the negative equity was there at bankruptcy and included in it rather than a new debt since bankruptcy.) If you walk away, the lender in repossession would then sell your house on the open market. A family member buying it and letting you live in it is a completely separate transaction.

You can't, AFAIK, stop paying the mortgage and then remain in the property long term. If it is repossessed you lose it. If you stop paying the mortgage then eventually it will be repossessed. Have you thought where you will live?

toasted

Thanks so much for the response. I appreciate the help and I'm glad to see the camaradarie. If you have been in my position I am sure you appreciate that there are so many issues that it is hard to get a solid opinion on all of them.

Looking at the quote in red:
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.

I am happy enough to pay the mortgage at the current time. Maybe next year I won't be in the best shape. My biggest concern was to emerge from BR and then not be able to pay the mortgage and be in a position that I would have to declare BR again. Once is bad enough, twice is downright carelessness ;-)
I am sure I can rent a house in the same area for an affordable amount, perhaps less than the mortgage. For the moment since the house is 'mine' I am content to sit tight, and I suppose it really can't get any worse for me, so I will make the best of this position. I take from the quote above that say in two years, with no recovery in property in NI, I can up sticks and walk away declaring that the shortfall is declared in the BR. I will confirm this with a solicitor in the next few months when I get the fee together. A sorry tale indeed, but it will be the first thing to work out in my favour.

Again, thanks for your time and advice.
Paul B.

silvercar

I take from the quote above that say in two years, with no recovery in property in NI, I can up sticks and walk away declaring that the shortfall is declared in the BR. I will confirm this with a solicitor in the next few months when I get the fee together.

You do need this checked carefully. By a solicitor experienced in bankruptcy and in writing.


Say you sold the property 2 years after bankruptcy, there are 3 scenarios:
1. The property sells for less than it was worth at your bankruptcy date. So the question is whether all the, now greater, shortfall is included in the bankruptcy.
2. The property sells for the same value as it was worth at your bankruptcy date. It seems that you could argue that this debt was part of the bankruptcy.
3. The property sells for more than the mortgage. So the extra after the mortgage is cleared would be returned to you. But, is there an argument to say that the shortfall at the time of your bankruptcy was part of the bankruptcy and so the lender should have that shortfall and you be returned more money? Practically I can't see that happening, but there is a theoretical logic to it and I'm curious to know what legal argument is used to say that it was part of the bankruptcy but now it isn't

silvercar

fermi wrote: »

Hope that is a bit clearer?

It does take a bit of thinking about, but once you get the idea that bankruptcy also covers current "liabilities" to pay a future debt that hasn't had it's exact value (or even existence) decided at the time of the bankruptcy, then it makes sense.

That explanation makes sense, thank you. I'm a statistician by training so I tend to think in numbers rather than concepts. I now see what you mean.

One further question if I may. If you remain in your property after bankruptcy for few years and then later decide that the mortgage is too difficult to manage and give the house up, is there a time limit to having the shortfall included in your bankruptcy? I'm thinking of someone who may cling onto their house for say 6 years, after which the bankruptcy would be off their credit record.