If we keep the house.....

MadameCholet

......and find months or years down the line we can no longer afford the mortgage due to interest rate rises can it still be included in this bankruptcy or would we end up going bankrupt again if there was still a big shortfall?

I say we, actually it's DH, I have moved out and am privately renting but he is still in the house and thinking of bringing the mortgage payments up to date instead of using the money as a deposit on a rental property.

We will both be filing for bankruptcy & he was going to hand the keys back to the house but he feels he could just about afford to pay the mortgage as it stands now, however we are at the end of a fixed rate deal & at the mercy of interest rates from now on so have no idea if it will still be affordable 12 months down the line.

silvercar

The first thing to do is find out what rate the mortgage will move onto.

The second point is that you would both be liable for a joint mortgage, even if you move out. So any mortgage arrears will hit both of you and should it be repossessed the lender will chase both of you.

As far as including any shortfall in the bankruptcies, from reading on here, any shortfall would be included provided you both didn't sign anything accepting liability. That would be the case if you went bankrupt first. After 2 yrs 3 months the OR would decide what to do about any equity if you still had the house. I'm not sure what happens if the OR returns the beneficial interest to you after 3 years (the max time the OR can keep it without taking any action I think) and then you got repossessed and had a shortfall after that time.

Remember that repossession with a shortfall doesn't automatically lead to bankruptcy. Lenders are prepared to wait, they agree repayment schedules and they accept relatively low settlement figures.

Ineedaname

As the loan is secured on the house then I believe only shortfall that occurs during your BR year would fall into BR, after discharge I guess you would be jointly liable.

However, that doesn't take into account any interest the OR may have in the property for up to 3 years. Nor does it factor in any possibility of you signing the house over to your ex and how that might affect the mortgage and your interest in the equity.

We really need a guru on this on.

silvercar

Ineedaname wrote: »

As the loan is secured on the house then I believe only shortfall that occurs during your BR year would fall into BR, after discharge I guess you would be jointly liable.

This is wrong. While the OR has the beneficial interest the shortfall would fall into your bankruptcy, there is even the suggestion that the shortfall will always fall into the bankruptcy.

Here is a thread that discusses it in more detail:

https://forums.moneysavingexpert.com/discussion/2219559

Ineedaname

The first para was assuming the OR has no interest in the property which I believe can happen in some circumstances.

stuart30

Well i was told by a debt charity that as the mortgage is secured on the house even if we for what ever reason handed the keys back as we couldn't afford the house any monies owing would automatically be cleared due too the bankruptcy.

Ive asked the time scale and she confidently assured me it was as long as we had the house...and the charging order against the house would also disappear as this is secured on the house.

Sounds a bit too good too be true,however she was positive this is the case.?

debtinfo

The first thing here is to seperate out two things, first you have the interest in the asset (BI) that is what the OR has 3 years to deal with and can either be sold, charged or handed back to you depending on the value etc.

The second is the liability for the mortgage which is different, Once you go bankrupt that liability will remain in the bankruptcy for ever unless you agree something with the chargeholder (not the OR) that reinstates a liability. This could be a deed ok acknowledgement when you hand the property back, it could be any agreement the mortgage makes you sign (sometimes) when you buy the interest back, it could be if you agree any changes to the mortgage for instance a remortgage or perhaps something included insome sort of arrangement to change rates or take a payment break.

Basically the liability will always stay in the bankruptcy unless you sign some sort of agreement with the mortgage company

ilovemydebts

Hi, my mortgage comp is now starting repossession after 20 month arrears. Just as i got the letter from OR saying BI is now mine after they dont want BI, rang to ask him about shortfall and he said it would fall into bankruptcy even though it was revested with me.

silvercar

ilovemydebts wrote: »

Hi, my mortgage comp is now starting repossession after 20 month arrears. Just as i got the letter from OR saying BI is now mine after they dont want BI, rang to ask him about shortfall and he said it would fall into bankruptcy even though it was revested with me.

Glad it worked out for you.

(Not surprised the BI was given back if there is a shortfall.)

silvercar

debtinfo wrote: »

The first thing here is to seperate out two things, first you have the interest in the asset (BI) that is what the OR has 3 years to deal with and can either be sold, charged or handed back to you depending on the value etc.

The second is the liability for the mortgage which is different, Once you go bankrupt that liability will remain in the bankruptcy for ever unless you agree something with the chargeholder (not the OR) that reinstates a liability. This could be a deed ok acknowledgement when you hand the property back, it could be any agreement the mortgage makes you sign (sometimes) when you buy the interest back, it could be if you agree any changes to the mortgage for instance a remortgage or perhaps something included insome sort of arrangement to change rates or take a payment break.

Basically the liability will always stay in the bankruptcy unless you sign some sort of agreement with the mortgage company

I've bookmarked this as this question keeps appearing on the forum.

Basic message is not to sign anything ever. For anyone who has kept their home through bankruptcy and now is back on their feet it is useful to know that any shortfall will go into bankruptcy and something that should be born in mind when considering a remortgage.