Negitive equity in bankruptcy

mojoparrot

Hi all

Can anyone give me an idea of what could happen to my home during bankruptcy?

I have been in touch with CCCS and after reviewing my circumstances they have recommended that I go bankrupt. I wonder what will happen to my home. My mortgage is intrest only - an attempt to reduce my outgoings. I have another 26 years on the mortgage and looking at house prices in the area I dont think that the house would provide any profit on sale and may be in small negitive equity (£5000 to £100000 negitive).
Im on a temporary contract at work and will finish at the end of August so an IVA is not an option for me .
The CCCS counselor thought that as the property wouldnt fetch a profit that the OR wouldn not order sale. I have had depression for 3 years and have a son with ADHD, the mortgage is mine alone I have no partner, she suggested that I tell the OR all this to claim exceptional circumstances. She explained that the property would be transferred to the OR for 2 years and 3 months and then would be transferred back to me (land registry).
Do I still continue to pay the lender the mortgage during the bankruptcy? Do I ring them and ask them what they will do? I have no arrears with them but have in the past and the mortgage is cheaer tthan renting. Can the house be sold from under me after the discharge? What coud happen in the 2years 3 months? Has anyone got experience of this?

Pease help I need to make the decision about the bankruptcy quickly and I am so scared.

Ineedaname

If the house is in negative equity or even if there's minimal equity, then it's not in the OR's interest to force a sale, they would get no funds from it.

You keep paying your mortgage of course, to keep the house, and don't worry about contacting the mortgage company, the OR will do all that.

dojoman

mojoparrot wrote: »

Hi all

Can anyone give me an idea of what could happen to my home during bankruptcy?

I have been in touch with CCCS and after reviewing my circumstances they have recommended that I go bankrupt. I wonder what will happen to my home. My mortgage is intrest only - an attempt to reduce my outgoings. I have another 26 years on the mortgage and looking at house prices in the area I dont think that the house would provide any profit on sale and may be in small negitive equity (£5000 to £100000 negitive).
Im on a temporary contract at work and will finish at the end of August so an IVA is not an option for me .
The CCCS counselor thought that as the property wouldnt fetch a profit that the OR wouldn not order sale. I have had depression for 3 years and have a son with ADHD, the mortgage is mine alone I have no partner, she suggested that I tell the OR all this to claim exceptional circumstances. She explained that the property would be transferred to the OR for 2 years and 3 months and then would be transferred back to me (land registry).
Do I still continue to pay the lender the mortgage during the bankruptcy? Do I ring them and ask them what they will do? I have no arrears with them but have in the past and the mortgage is cheaer tthan renting. Can the house be sold from under me after the discharge? What coud happen in the 2years 3 months? Has anyone got experience of this?

Pease help I need to make the decision about the bankruptcy quickly and I am so scared.

If the properties value increased in the 2 years and 3 months then they
would look to obtain some equity from it.

Ineedaname

Dojo, am I right in saying that if there is equity in the property later on the OP could offer an amount to the OR to buy back the BI, rather than the OR forcing a sale to recover, for instance, just a few K?

dojoman

Yep, they would be offered the chance to buy back the BI.

mojoparrot

Hi all thanks for the messages,
What would happen to the mortgage then if the OR didnt force a sale and I continued to pay it. Surely it wouldnt be included in the bankruptcy order?
Also how does the OR decide what my properties worth? If there is £10,000 in it wouldnt the lender be better to force a sale and take that rather than loose the lot?

Ineedaname

You keep paying the mortgage in order to remain the owner of the property. If you stop paying and the property gets repossessed then any shortfall (negative equity) would fall into your BR as it would then be an unsecured debt.

Whilst you continue to pay the mortgage and retain the property it remains a secured loan and therefore not included in the BR.

The OR may engage a surveyor or estate agent to obtain a valuation. You can do the same for an independant valuation.

I doubt they would force a sale for such a low amount of equity, most of it would be eaten up with fees. But they would likely offer you the chance to buy back the beneficial interest in the property if the market moves up and some equity looks likely. You make an offer rather than paying the full amount of equity.

I hope this clears it up a bit for you.

mojoparrot

Thanks INAN that makes sense, will it make a difference if I have defaulted on the mortgage at any point as I did but then caught back up again? And will the OR revisit the value of the property after the 2years 3months? If you have a third party who would buy the beneficial interest (if there is any) at the outset then would the OR revisit the value of the property in the 2years 3 months?

Sorry to ask so many questions its just that I have to get this right.

Mojo

mojoparrot

Sorry about this INAN do you think I should start gathering evidence about my circumstances for the OR, such as GP letters about my health and my sons condition (ADHD) to add weight to my case?

Ineedaname

If you defaulted in the past and made the arrears up then that has no bearing on your BR as far as I know. It's history as it were.

The OR can offer the BI back at any time I believe and you have to negotiate a price if there's equity or the OR may suggest a nominal amount if there's no equity. If the BI is bought back before the 2 years 3 months then there is no further interest in the property from the OR. Done deal.

Why do you think you need health evidence for the OR?

mojoparrot

Thanks INAN again!

I was advised by the CCCS counsellor that I may need to put forward information about my own heath and my sons to fight the case of them not forcing a sale. The bankruptcy is just the end game of 3 years of strugging with debt and it hasnt been pretty.

Im going to get a valuation on the house ASAP and move forward with the bankruptcy, thanks for the support I'll let you know what happens.

Mojo