Mortgage shortfall and arrears after bankruptcy

midlandlady

I was BR 8 May 2009 and discharged 30 October 2009. I have managed to stuggle to pay the mortgage of my home but now due to personal circumstances I am fighting a losing battle. I may have to just let them repossess and then find somewhere to rent. I always understood the arrears and shortfall (my house is £30k in negative equity) formed part of the bankruptcy should they reposess it and I would not be liable for it. Now I have read on various websites and forums the mortgage lender can chase you for this debt up to 12 years after the reposession even if the property was included in the bankruptcy, the logic being the debtor will have had time to get their finances straight and be able to pay towards the debt. Please can anyone clarify this for me and if the former is true point me to the law that states the shortfall and arrears DO become part of the bankruptcy, thanks

out_of_cash

if its factored in the bankruptcy, they can chase as much as they want but there is sod all they can do or get,as far as i am aware once you are discharged its a big no no chasing someone for a debt which was incorporated within the br order, whether thats a mortgage or credit card debt.


if in doubt contact insolvency service who will clarify this for you.

once br there is nothing they can do:D

Ineedaname

As far as I am aware, they can only chase the shortfall if you sign a paper taking responsibility for it. So sign nothing and it will drop into your BR once the house has sold.

mel12

So sign nothing and it will drop into your BR once the house has sold.

This bit is really important - the mortgage lender will probably try to get you to sign a paper acknowledging liability for the debt so they can chase it. So long as you don't sign anything after BR it will be included in the BR.

NeverAgain_2

I agree with what's been said so far, but is there a point when the mortgage arrears or negative equity cannot fall into the bankruptcy?

The OP has soldiered on, paying the mortgage for two years, but now cannot continue paying.

What if she had soldiered on for five years, or even 10?

Could she still rely on her 2009 bankruptcy to wipe out any shortfall?

silvercar

NeverAgain wrote: »

I agree with what's been said so far, but is there a point when the mortgage arrears or negative equity cannot fall into the bankruptcy?

The OP has soldiered on, paying the mortgage for two years, but now cannot continue paying.

What if she had soldiered on for five years, or even 10?

Could she still rely on her 2009 bankruptcy to wipe out any shortfall?

I have been curious on this point. I think the answer is to be careful on the "don't sign anything" front. If you remortgage to a different lender or even to move to a different mortgage package with the same lender (eg take advantage of a 5 year fixed rate), you will be signing something and that "something" could well include terms that mean you are then liable again for any shortfall.

Found on another thread:

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

NeverAgain_2

silvercar,

Thanks for that - you are obviously more skilled with the forum search button than me.

debtinfo's post pretty much covers it.

silvercar

NeverAgain wrote: »

silvercar,

Thanks for that - you are obviously more skilled with the forum search button than me.

debtinfo's post pretty much covers it.

It was such a useful post that I subscribed to the thread for future reference.

midlandlady

Thats very interesting and informative thanks. At one point the mortgage lenders were thinking of capitalising the arrears if I kept up with the contracted payments. I supposed there could have been a clause in there I could have made myself liable without even knowing. No chance of remortgaging with the market conditions at the moment and my credit file. Just have to find an understanding Landlord who is willing to rent to a discharged bankrupt...easier said than done!