Bankruptcy and Negative Equity

Lleuadwen

Hello
Before going BR I have been trying to get a definitive answer to this question regarding my house (which is in my name only):

House value £92,000 or less
1st mortgage £92,000 outstanding (interest only being paid)
2nd mortgage £81,000 outstanding (repayment)

Result - no equity for 2nd mortgage, possibly not enough for 1st either

Would the OR include the 2nd mortgage in my bankruptcy, even though it is secured? Or does it have to be repossessed for this to happen?

I keep getting conflicting advice from several agencies on this matter and I really need to know how it would be dealt with so I can make an informed choice as to what to do next. Incidentally, it is the 2nd mortgage monthly payment that is forcing this issue and true to form First Plus will not even engage in discussions regarding this.

Thanks in advance for your help.

Tupperware_Queen

I had a similar situation, after separating from my husband. The only way the shortfall can be included is if you allow the property to be repossessed. I tried every way to be able to stay in my house, but it was just not possible. I was dealing with first plus too.

Lleuadwen

Thanks for your reply, it was what I suspected. I have written to FP telling them they will catch a cold when it is repossessed and asked them to remove the charge so it can go into an IVA instead of BR so at least they will get some money back, they didn't really answer so have asked a second time. They are just not engaging with me to try to resolve the issue. That's their way apparently.

Cheers
Lleuadwen x

tigerfeet2006

Just out of interest which agencies have you spoken to?

Penelope_Penguin

Lleuadwen wrote: »

Thanks for your reply, it was what I suspected. I have written to FP telling them they will catch a cold when it is repossessed and asked them to remove the charge so it can go into an IVA instead of BR so at least they will get some money back

If you have enough money to pay into an IVA, you'll likely have an IPA in a BR. If your property is repossessed, your lender will get some payment from a BR.

Or possibly it's too late and I'm missing something obvious

Tupperware_Queen

First plus's best effort to help me was to reduce my monthly payments and extend the loan....payments went down by about £50 a month, for an extra 10 years on the loan....you can imagine what I said to them!!

Lleuadwen

You're correct Penelope they would get 'something' from an IPA but my understanding is IPA's are for 3 years whereas an IVA is for 5. Also they would get less from an IPA as by repossession the 1st mortgage would not get paid in full so that shortfall would also be added to the pot and get paid from the IPA.

Tigerfeet - thanks for your post I have spoken to a couple of people at CCCS, the last person from the bankruptcy team actually contacted the OR in Leeds on my behalf who stated that the only way the shortfall on the 2nd mortgage could be included would be through repossession. I then spoke to Repossessionhelpline.org.uk whose 'senior' repossession officer told me that First Plus never go for repossession (which I doubt is true) and also that the OR had the authority to include a second charge if it was deemed unaffordable and force FP to remove the charge. As you can imagine, all this left me SO confused, which is why I have posted this question.

I am now contemplating emailing/telephoning the OR myself to ask this question or speak to a local insolvency practitioner to see if I can get to the bottom of the problem.

Thanks for all your replies x

IF

Hi Lleuadwen, before you do that.....contact two other Debt Charities and see what they say. We always recommend you speak to at least two.

Main recommended sources of help:

• National Debtline - Website: National Debtline Telephone: 0808 808 4000
• Citizens Advice Bureau - Website: Citizens Advice or visit your local CAB centre (find nearest)
• Consumer Credit Counselling Service - Website: CCCS Telephone: 0800 138 1111
  

Others:

• Business Debtline
  - Website: Business Debtline Telephone: 0800 197 6026
• Christians Against Poverty
• PayPlan
• TaxAid - Help with tax debts.

Best wishes
If...x

tigerfeet2006

Well done on speaking to CCCS, they have given you the correct info and confirmed it with the people who would be dealing with your case.

You can see why we do not recommend people like the second lot you mentioned. Shysters the lot of 'em and just after your money.

sundays

Im no authority on this, but if there is negative equity as you say and as high as it is , they may not bother pursuing for repossession because there is nothing to gain, even if you went BR you could continue to pay the first charge and remain in the home (i have) and prob not a lot would happen with the 2nd even if it wasnt being paid , because it would end up in time in going into the BR pot , if and when they eventually decide to repossess.

your IPA would not go to them if you went BR and were still in the home as its not part of the BR at that point, and your I & E can be shown to reflect the 2nd charge if the OR allowed that.

hope that makes sence ,

Its a funny one, because either way they lose out - you may hold the cards in your favour by a ) going BR, b) continuing paying the first charge and remaining , c) see if they went for repossession - and at that point the debt will go from secure to unsecure and be part of the original BR claim.

Lleuadwen

An update on this for you....

Did speak with my local OR and a very friendly and helpful Insolvency Practitioner, basically the charge cannot be removed by the OR, it stays until it is paid off or the house is repossessed. However the OR will deem the current payment unaffordable and only affordable payments will be made during the 3 years the property will be with the trustee, however after that time First Plus will expect the full repayment of all monies by the end of the original term (cannot be extended in my case).

In the meantime had a call from First Plus yesterday who said that now I had missed a month there were things they could do. Offered me 10 months paying half the amount (350) and a further 11 months at 352. Where does the unpaid balance go? Well, on to the existing balance of course! Does this improve my situation....um NO!

So it would seem there is no choice but to go for rented and hand the keys back to the first lender, the question then is to go for an IVA rather than BR...any opinions on this?

Cheers
Lleuadwen x