bankrupt or not?

sumary320

Me and my sister brought a flat together 7 years ago. We then took out a secured loan on the property to consolidate some debts. Since then she has moved out and my boyfriend has moved in and we have a 21month old son. My sister is in a rented house with her 7 year old daughter. She pays me some money each month to cover some of the secured loan and another personal loan we took out with our bank at the time. She struggles to pay the money to me and has decided to go bankrupt to clear all of her debts. but what will this mean for me? I cannot afford to pay all of her debt on the flat and it is now in negative equity. We have had the flat on the market for the last 2 years but it has not sold. Will they take the flat off of me? will I have to pay all of the outstanding debt including her share?
I work full time and take home around £1500 a month. Will I be forced to go bankrupt if I cannot or will not pay her debts?

katsu

If you are both named on the mortgage and the loan then yes, you will become liable for all of it when your sister goes bankrupt. Sorry.

Tixy

Hi

If your sister goes bankrupty then you will become responsible for the debts and if you could not keep up with repayments on them then the property could be repossessed.

But if you are certain she is going bankrupt then I would get some free debt advice from one of the debt charities and also try to work out a statement of affairs to see if you could afford to keep up with the repayments between you and your partner.
It may be that with some juggling and cutbacks that you might be able to manage to keep up with repayments? If you wanted to complete and post a statement of affairs on here people might be able to give you an idea as to what other options you might have rather than bankruptcy.
This is the statement of affairs calculator we use - http://www.makesenseofcards.com/soacalc.html. Even if you didn't want to post on here I would say its still well worth doing to see if you could manage in the short term until the property sells.

sumary320

its not an option to carry on paying all of her debt too. the flat is too small for us as we are having another baby (2 bed, 2nd being very small) and my boyfriend doesn't want to take on someone elses debt (he has no debt himself) if it wasn't in negative equity then he would have considered it. I would prefer if we were to sell the flat and then she could do what she wanted with her half of the debt if they could split it between us?
thanks for your comments though

Tixy

Debts won't be split between you, if its a joint mortgage then you are both responsible for the full debt.
So if she goes bankrupt and you sell the house then you will still be responsible for paying all the negative equity debt off the house. So at that point you'd either have to consider if you could afford to come to an arrangement with the mortgage company to repay that debt or consider whether you might need to consider bankruptcy yourself.

ashaput

if your sister goes on bankrupt then it is you who take her responsibility in paying off the debts. anyway, don't your boyfriend have a job or something that could earn money? he should help you now.

dancingfairy

Anything that is in joint names the remaining debt will fall to you to pay - there is no half and half. Anything that is just in her name will go in the bankruptcy and will not cause you any problems.
Both of you need to get free independent advice from the CCCS, National Debtline or your local CAB.
Best of Luck
df

fermi

You definitely need to get some free advice soon.

See: https://forums.moneysavingexpert.com/discussion/2077631

As you have another child on the way, and the flat is too small, getting rid of it might be the preferable option anyway, and it's simply a question of doing that in the best way?

Perhaps looking for somewhere of a larger size to rent soon, and then offering voluntary repossession of the flat? Obviously, with your sister going BR you would be liable for any shortfall on your own, but at least it would be crystallized and a known quantity, and of course you would be securely in accommodation suitable for your family rather than worrying whether you would be able to stay where you are?

Then you would be in a better situation to make a calm and informed decision on how to deal with the debt left to you.

Just my thoughts, which don't constitute advice. As said, you need talk to a free impartial debt/housing advisor.

bunny999

So is your boyfriend living with you rent/mortgage free?

sumary320

my boyfriend and i each pay half of all the the bills, mortgage and childcare costs! He is working full time and is more than willing to provide for his family, what he is not prepared to do is to pay off my sisters debts which I can totally understand. He has no gain in living in the flat and would rather I handed over the keys so we could go and rent a family home.
If a married couple divorced, how would the courts deal with debts? would they not say each is responsible for half of the debt? sorry i'm probably being niave. Never thought my sister would do this!

RAS

You need some proper advice as fermi suggests, from one of the debt charities and possibly Shelter.

Secured debt is not covered by bankruptcy, so she remains responsible for that. There is no Beneficial Interest to be paid out to the OR if the property is in negative equity.

Is the other loan secured or unsecured? Joint or single name and how much is left?