Bankrupt in 2010 negative equity in property

newme2010

Hi anyone reading this – if there are any credit report/bankruptcy/ property/insolvency experts out there – please read this + if you have any advice, please share your knowledge!

I declared myself bankrupt in 2010 after borrowing too much money when the banks were just throwing it at people. Entirely my own fault, and I am much, much more careful these days. I would NEVER live beyond my means again. Lesson well and truly learnt.

My house is worth significantly less than I owe on it (thanks NR & 120% mortgages), but it is covered in my BR as I declared it as a debt in 2010 . The ?beneficial interest belongs to the OR, who can sell it any time if they want until Feb 2013 (when I think they return it to me). This is unlikely as it is likely to sell for a lot less than 108K before they return to me (I estimate £90k as an optimistic offer), therefore having at least an £18K shortfall. I was told that Northern Rock (NR) might cover some of the shortfall as it was their fault they lent me that amount in the first place, but am yet to speak to them about this. I was also told that I could probably port my 100% together mortgage, and just borrow on a property of the same amount. But I am not sure either of these clauses will be true for me following BR in 2010.

My options are:
1. Continue to pay mortgage & stay put, selling up in few years when prices have recovered enough to break even.
2. Voluntarily return property to NR & rent flat somewhere cheaper to save for deposit on place when BR off record & I can get a mortgage for scratch

Trouble with option 1 is this: this was the plan when my ex and I were still together. We were going to live happily ever after in the property. We split last year (!), so now whilst I am fond of my little house (it was always in my sole name), I don’t want to live in that area for too much longer as it is 20 miles from my family & friends. We are still good friends, so I intend to discuss my plans with him, as he is the only one who knows about my BR. Looking at how the property market is going, I don’t think I could break even in less than 5 years.

I bought in 2006 for £100k, borrowed more secured debts with NR’s helpful up to 120% value loan (!) to now owe £108K. Properties in the street are currently marketed for £99K-105K, and they have proper central heating. I have original 1970’s ducted air, and would most likely need to reduce price because of it, or install new system. Neither of which I can afford to do (quoted ~£5K). So even at an optimistic sale of my house at £90K, that is still a £18k deficit. Add selling/moving fees etc., and you’re talking a cost of £20k at least. But I cant sell now, as the beneficial interest (or whatever it is called) is with the OR until at least Feb 2013. I am not going to pay the fees to buy it back, to then saddle myself with the deficit. I/we originally planned to take advantage of flat housing market to let me keep house until OR revest interest to me then live there forever!

Option 2 is sounding more appealing as I typed the background info to option 1 above! As the interest in the property is with OR (I mean their dedicated company/dept who deals with negative equity properties – cant remember what is called) I think I can give it back to the bank and walk away, as the deficit from any sale will be included in my BR of 2010 (I included the house details in my petition). I plan to rent somewhere cheaper and save like mad, so when I am able to get back on property ladder, I have a decent deposit, so will not be in as risky place again. But, I am in the middle of correcting my credit report with Experian (some BR debts were still showing balances owed, when they should have cleared) so don’t want to just stop paying NR and have more defaults on my record, as I am now 2+ years since my last default around the time of my BR, and want to continue with a clean slate, so to speak.

My questions are:
a. Can I just give back the property to NR? Is this because interest lies with OR, or could I just do it anyway?
b. Can I continue to pay NR until the hand-back is complete to avoid defaults? Will I be liable until it is sold, or would the difference from hand back to sale, just be included in BR total debt?
c. Are there mortgages available to a now solvent previously BR person who has good deposit Eg. Can I get one at higher interest% then switch when have proven self if need be?
d. Am I mad to step off property ladder, even though staying on it will just cost me money, when I don’t really want to live where the property is?
e. What d I tell my family about moving out of mortgaged home into rented without having to tell whole BR story? (they will only worry – its not so much about my pride, although I would rather not have to tell anyone, ever!!)

Any thoughts are gratefully received – has anyone been in a similar situation?

I plan to speak to NR about how long it takes to complete voluntary repossession process, CCCS re impact on my credit score (which is just starting to look a bit better), OR about the voluntary repossession & interest in the property etc. but if anyone can offer any advice it might help me make the decision more quickly, I would be very grateful.

Thanks Chris x

JCS1

just bumping this one up the board, I'm not too good with property so will let someone else comment