Possibly a stupid question about bankruptcy and mortgage shortfalls...!

silvercar

Not paying FP is a strategy because it does put them in the position where they gain nothing by repossessing, gain nothing by making you bankrupt. The problem is that it can take time for them to realise that they can do nothing financially beneficial to themselves. Often the left hand doesn't know what the right hand is doing, so they can pester you to make payments and threaten all sorts without realising it will cost them more than they gain. It can get to the point where they try to repossess before realising them there is little point.

In the slightly longer term, house prices may rise, which can mean there is some equity there for FP and as your mortgage reduces the chance of their being some equity for FP increases. When you clear your mortgage FP become the first lender, by which time interest and arrears have mounted up. So this is a debt that will have to be dealt with in the long term.

You need to consider whether going bankrupt now and removing the debt is better than having the debt to deal with in 5-15 years time.

Maizy

Hi Maxnana

So many things to think about isn't there? Only you really know the right decision to make and its good you are obtaining as much thought as possible on the subject. After all BR is no light hearted subject.

Its a tricky one, we had a mortgage and SL and had considered every option available. Part of the stress created with debt, is having heavy ties with houses, upkeep of said houses and the knowledge that if you stop paying the SL, you will still owe the money and at some point will have to deal with it.

Giving our house up was one of the hardest decisions to make, heart wrenching in fact as it can bring out all kinds of emotions from guilt to failure etc etc etc. However, we knew that we had the opportunity to put it behind us instead of adding further months/years of stress to what seemed at the time to be an impossible situation.

Members are correct in saying what happens when things need doing/replacing, this all falls to the homeowner. In saying that everyone is different and if you believe you have all areas covered in terms of affordability, then you may decide to stay put, only you know what you can handle. Once we stopped paying our SL, the harassment was unreal so we are glad to be rid, to start afresh, to work out a way forward without the constant emotional struggle knowing the debt is still there.

Not saying its been easy, Im having good and bad days but its early days and I think discharge will bring on many a step in terms of recovering from BR. One thing we dont have now is pressure of any kind, ok money is tight for a while but we sit in the knowledge that no cloud hangs over our heads and that the whole purpose of BR was to finally be free from what had seemed a burden for too long. Many things can determine how we go about making decisions eg, children's ages, relationships being affected, how much debt, how long left on mortgages, childcare/family issues coupled with the strain of debts etc etc. Everyone is different and its all about your own personal circumstances and what is at the top of your priority list.

Good luck, keep thinking what is best for you whilst remaining realistic and honest to yourself.

SteveABC

Maxnana

Your situation sounds quite similar to mine. I suppose what you do is dependant on whether you want to try and keep your home or not.

I moved out of my mortgaged property, secured privately rented accommodation, went bankrupt and then sent the keys back to the lender (in that order). The value of my home just about covered the morgage, but like you, a second loan (with First Plus) put the house into a negative equity situation.

The mortgage and the secured loan were included in my statement of affairs form for bankruptcy, although they did not actually become a debt in the BR until the repossession happened, which took Northern Rock (main lender) 9 months to start. In that period of 9 months, Northern Rock never contacted me (apart from offering help/plans/advice about paying the mortgage arrears), but First Plus hassled me nearly on a daily basis (letters/phone calls etc.) for their payments. Every time, I just told them I was bankrupt and could not afford to pay them (100% of my disposible income forms an IPA, which I kept reminding them of).

Once the house is actually repossessed, then the mortgage shortfall and secured loan will fall into my bankruptcy, as they were included in my original BR application.

If you do this, you must remember to include this debt on your BR form.

If you decide to stay in your home, I imagine the secured lender would chase you and give you unbearable pressure to pay. You also have to consider that the OR will have an interest in your home for a period of time and would expect the equity if it ever returned to equity in that period.

I considered the second situation, above, but felt it was all too stressful and decided on a clean break and new start (BR). It's not easy, but you will get through it - there is loads of support out there.

Very best wishes with whatever you decide to do.