Benficial Interest and Secured Loans

Chuckie1998

I am in the final stages of buying back the BI in my house. It has now been going on for months, however, the stage with my secured loan company Firstplus has me confused.

I have written to my mortgage company, RBS, and they have given written permission for the transfer of ownership to come back to me.

I asked the same of the secured loan company, Firstplus, and they have sent me a new credit agreement to sign. their reply states...

"The reason behind the requirement for a new credit agreement relates to your financial circumstances being crystallised by the bankruptcy position. In this respect, we need to astablish your personal covenant (ie. your agreement to pay) and will need a new credit sgreement to be completed."

If this is correct, then why hasn't my mortgage company asked for a new mortgage document to be signed?

Also, as i have already been paying both my mortgage and secured loans on time throughout my bankruptcy, why do Firstplus need a signed "agreement to pay" all of a sudden?

tigerfeet2006

They are being very savvy. At the moment if you don't remortgage and don't sign any agreements if you have the house repo'd at any point the mortgage shortfall and the secured loan will fall into the BR no matter when it happens. If you sign the agreement you are creating a new debt that would not fall into the BR should the worst happen at a later date.

So as I said very savvy. It's up to you whether you sign it at all or just tell them you are not and the original agreement should stand as the terms have not changed.

Chuckie1998

I never thought of that. How clever they are !!

silvercar

If you don't sign and they don't consent, you don't get the BI back.

So the question is whether getting the BI back is worth signing liability for the FP loan?

debt_doctor

silvercar wrote: »

If you don't sign and they don't consent, you don't get the BI back.

Hi, It's very rare that I don't agree with silvercar, but I would like to throw the above open to debate.

My view is that the beneficial interest has nothing to do with the lender and permission is sought when not neccessary. The ben int is 'profit' after sale and redemption of secured loans, which the lender never has an interest in.

Now, if the trustee does nothing in 3 years the ben int automatically reverts back to the bankrupt - how can that happen if the lender has a right to refuse?

I do accept that in some litarature (including government literature) it does state that you may need permission of the lender in the process, but may does not mean will.

I wondered what others thoughts were on this subject?

DD

silvercar

debt_doctor wrote: »

Hi, It's very rare that I don't agree with silvercar, but I would like to throw the above open to debate. Most of my knowledge is from reading around, I have no legal background, feel free to disagree

My view is that the beneficial interest has nothing to do with the lender and permission is sought when not neccessary. The ben int is 'profit' after sale and redemption of secured loans, which the lender never has an interest in.[COLOR="rgb(255, 140, 0)"]Agreed, though I see this as a canny move by the creditor[/COLOR]

Now, if the trustee does nothing in 3 years the ben int automatically reverts back to the bankrupt - how can that happen if the lender has a right to refuse?The OR only has to start dealing with it before 3 years are up, so it is possible this could cause a delay.

I do accept that in some litarature (including government literature) it does state that you may need permission of the lender in the process, but may does not mean will.

I wondered what others thoughts were on this subject?

DD

I was assuming that if the consent is asked for, it is a requirement. If their consent is not necessary, then obtaining it is not necessary.

Does it in some way depend on whether the BI is being bought back or not?

If the BI has no value, then it reverting after 3 years, with no consent from secured creditors is a possibility, but what happens if the BI is being bought back? Obviously no one wants to pay for the BI without it being recorded as having been regained, so the question remains on whether it can be returned without consent of secured creditors.

At the very least, not obtaining consent could delay the return of the BI until 3 years. At which point (I would have thought) the OR is obliged to deal with it in some way, so the issue is forced. So the question becomes, if the (ex-) bankrupt refused to sign liability for a secured debt, does the OR have the power to return the BI or not?

silvercar

3 scenarios

1. Loads of equity - being bought back. Signing is unimportant as there will always be enough money to repay the loan, so you lose nothing by signing.

2. Large negative equity. Don't sign to avoid future liability for the debt.

3.Little or no equity. Signing means the BI is transferred swiftly. Good if you feel the property price will rise and so you avoid the BI potentially costing more later. Bad if there is likely to be a repossession at any time in the future (repo's generally fetching a lower price on the market) or if you feel that the property price won't increase in the future or if you may struggle with the mortgage in the future.

Further question, if the bankrupt refuses to sign and the OR returns the BI regardless, could the creditor take any action against the OR? or the bankrupt? or get a future sale annulled in court on the grounds that the bankrupt shouldn't have owned the BI without the creditors consent and therefore shouldn't have allowed the sale to proceed.

debt_doctor

We need to seperate of course two issues;

Signing a 'deed of ackowledgement', which I would never advise anyone to do in any circumstances

and

Is permission required of a lender to enable the process of sale of ben int to go ahead between the trustee and interested parties? I do think this one is important to clear up as I see this pop up on the board from time to time.

This is what the Bankruptcy Association says in their book "Saving the family home in bankruptcy"....................
"When negotiating with a trustee to buy back the interest in a property, it is not neccessary to seek permission of the mortgage lender. The legal implications concerning mortgages are often not fully understood, even by solicitors. Homes have been lost because un neccessary permissions have been sought from mortgage holders. Mortgage holders,who are unwilling to take risks,can missunderstand and refuse a permission it is not neccessary to have"

DD

debtinfo

maybe so, but the IS say they wont transfer it back without seeking permission, since the bankrupt has no right to have it transfered back early, the point is then really moot

debt_doctor

debtinfo wrote: »

maybe so, but the IS say they wont transfer it back without seeking permission, since the bankrupt has no right to have it transfered back early, the point is then really moot

They do indeed say just that - they will SEEK permission - but what happens if they don't get permission? Would the IS hold up a sale of ben int of lets say, £30k, that is (in this made up case) clearly in the interests of creditors, because the lender doesn't give permission.

I don't know the answer to that - what are your thoughts?

DD

debtinfo

they normally only ask you to seek permission if it is in negative or close to negative equity, remember that if there is lots of equity, it would most probably go to a seperate trustee who will have their own thoughts on the matter, and in those cases the property is usually(though not always) sold.