Bankruptcy, voluntary repo and shortfall

badgerscash

Hi and thanks for having a look at my very first post, thanks for all of the info and advice in advance.

We bought our home in 2006 at the peak of the boom paying £80k with a 100% graduate mortgage through HSBC. We lived in the house for three years, due to my partners rare health condition were forced to move 200 miles away as the hospital has a specialist clinic. In 2009 we put the house up for sale but had two viewings in six months, we were advised to put the house on the market for £70k. After much deliberation we told the bank we needed to move and could wait no longer, no help was offered until we threatened to stop paying. We were given written permission to rent the house at this point.

We did not set out to become landlords, having the house rented posed a massive financial threat to our lives and we planned to sell as soon as the market improved.

We have had three tenants live at the property. First moved out without notice, we paid the mortgage (aswell as) rent at our home for two months and had lots of repairs. Second lost his job, for four months we received half rent. Third has just lost his job, can pay us nothing and is unsure if eligible for Housing Benefit.

We are also in neg equity, currently owe £70k houses nearby are advertised for £60k and have not sold for two years,selling at auction for £35-50k. We were advised by an estate agent we ought to accept an offer of £55k and that was two years ago.

So, we are pretty sure we have paid the mortgage payment for the last time, we obviously can't sustain two houses long term and the prospect of having another stranger move into the house is disturbing, chuck in the negative equity and we feel like bankruptcy is the only option. We would have to rent it for another 10-15yrs in the hope of the market improving at that would be to break even.

Could people try to guide us maybe with a to do list? i will post a statement of affairs along with steps taken so far.

Regards,

badgerscash

I earn 21k, my wife looks after our two children both under 5, her listed income is actually DLA payment for her health condition.

Thanks again.

Statement of affairs -

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 1310
Partners monthly income after tax....... 207
Benefits................................ 450
Other income............................ 0
Total monthly income.................... 1967

Monthly Expense Details
Mortgage................................ 427
Secured/HP loan repayments.............. 0
Rent.................................... 595
Management charge (leasehold property).. 0
Council tax............................. 93
Electricity............................. 45
Gas..................................... 45
Oil..................................... 0
Water rates............................. 50
Telephone (land line)................... 20
Mobile phone............................ 24
TV Licence.............................. 12
Satellite/Cable TV...................... 20
Internet Services....................... 10
Groceries etc. ......................... 450
Clothing................................ 100
Petrol/diesel........................... 150
Road tax................................ 26
Car Insurance........................... 79
Car maintenance (including MOT)......... 57
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 40
Pet insurance/vet bills................. 0
Buildings insurance..................... 18
Contents insurance...................... 15
Life assurance ......................... 7
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 15
Entertainment........................... 0
Holiday................................. 50
Emergency fund.......................... 50
Total monthly expenses.................. 2418


Assets
Cash.................................... 0
House value (Gross)..................... 50000
Shares and bonds........................ 0
Car(s).................................. 2800
Other assets............................ 0
Total Assets............................ 52800


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 69000....(427)......5
Total secured & HP debts...... 69000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
virgin card....................2500......45........0
mastercard.....................500.......15........16.9
Total unsecured debts..........3000......60........-


Monthly Budget Summary
Total monthly income.................... 1,967
Expenses (including HP & secured debts). 2,418
Available for debt repayments........... -451
Monthly UNsecured debt repayments....... 60
Amount short for making debt repayments. -511

Personal Balance Sheet Summary
Total assets (things you own)........... 52,800
Total HP & Secured debt................. -69,000
Total Unsecured debt.................... -3,000
Net Assets.............................. -19,200

badgerscash

We own two cars, mine is used for work as a housing officer, worth £400. Other is needed by my partner for health probs and transporting children around, worth £2200. We really need to keep the more valuable of the two cars as we bought the car for its safety rating and travel to family regularly. Are we likely to loose this?

PippaGirl_2

Are you both going BR? Or just one of you? If both you need to do separate SOA's whereas the one above seems to be joint.

You won't be allowed to claim expenses on it for the house you own and the house you live in so should just quote the one you live in.

As a general rule, cars are allowed up to a value of £1000 anything more they would sell and give you £1000 to buy a cheaper car taking the excess cash into the BR for creditors. I have known of occasions when they have allowed cars to be kept on rare occasions up to £1500 but I am fairly sure your car value is too high and you wouldn't be allowed to keep it.

tigerfeet2006

The maximum is £1k on cars. You could offer to pay the OR the difference if you can find the money. You could sell the cars for their true value and buy a new car that is within the value range and use the rest of the money for your fees or give it to the OR. You will need to prove the need of the cars. Yours will be fairly obvious but your OH may need to get a letter from the Dr.

If you are going to get rid of the house then stop paying the mortgage and take it off your SoA.

Have you taken any advice from the debt charities? National Debtline, CAB, CCCS.

badgerscash

Yes we will both be going bankrupt so we will do separate SOAs, my wifes will be fairly straight forward as she only recieves money from DLA and Child Ben, would we have to split payments 50/50 for Tax credits as we claim these jointly?

Also re the expenses for the mortgaged property, do i have to remove the mortgage repayment and buildings insurance? everything else relates to our current home.

badgerscash

If given the option i would try and raise money for the car, maybe borrowing from family, could i take money from a credit card i am currently using in preparation of this? i have withdrawn my ISA which will cover the BR fees for us both.

We have taken some advice from national debt line and they have given us the option of BR before acc settled with vol reposession as this is quicker, or forced repo which he suggested could take over a year to sell the house and have the final bill. I would rather avoid this being part of my families life for a year if poss.

Letter from the Dr would not be a problem. We bought this model as it has a 5 star safety rating and was the only car within our budget that had this. 9 airbags etc I hope we can keep it OHs mum is disabled and we help her, my family live 200 miles away also.

PippaGirl_2

Before going BR it is expected that you have sought legal advice from somewhere such as CAB before hand, just a warning as Judges may not rubber stamp a BR and approve it if you haven't.

Yes, you'd need to remove the expenses on the mortgaged property.

I would add as tigerfeet said, cars are not automatically allowed to be kept the OR decides whether they are exempt from the BR based on need and value that goes for both of you. I have my OR appointment today and am really hoping to be allowed to keep my car so I realise the anxiety over this.

badgerscash

Took some more advice this morning from business debt line as this property would be cons a buy to let. Was advised to stop paying the mortgage but maintain buildings ins just incase, realised we can only decide what course of action would be best once the house sold and mortgage settled. was told to consider IVA and poss full and final settlement too as my family may be able to lend £10k.

You will notice that our other income has been reduced to zero, i was advised that as this is DLA for my wifes care then we have no legal responsibility to declare this. Does that sound correct??

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 1310
Partners monthly income after tax....... 0
Benefits................................ 450
Other income............................ 0
Total monthly income.................... 1760

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 595
Management charge (leasehold property).. 0
Council tax............................. 93
Electricity............................. 45
Gas..................................... 45
Oil..................................... 0
Water rates............................. 50
Telephone (land line)................... 20
Mobile phone............................ 24
TV Licence.............................. 12
Satellite/Cable TV...................... 20
Internet Services....................... 10
Groceries etc. ......................... 450
Clothing................................ 100
Petrol/diesel........................... 150
Road tax................................ 26
Car Insurance........................... 79
Car maintenance (including MOT)......... 57
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 40
Pet insurance/vet bills................. 0
Buildings insurance..................... 18
Contents insurance...................... 15
Life assurance ......................... 7
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 15
Entertainment........................... 0
Holiday................................. 50
Emergency fund.......................... 50
Total monthly expenses.................. 1991


Assets
Cash.................................... 0
House value (Gross)..................... 45000
Shares and bonds........................ 0
Car(s).................................. 2800
Other assets............................ 0
Total Assets............................ 47800


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 69000....(0)........5
Total secured & HP debts...... 69000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
virgin card....................2500......0.........0
mastercard.....................500.......0.........16.9
Total unsecured debts..........3000......0.........-


Monthly Budget Summary
Total monthly income.................... 1,760
Expenses (including HP & secured debts). 1,991
Available for debt repayments........... -231
Monthly UNsecured debt repayments....... 0
Amount short for making debt repayments. -231

Personal Balance Sheet Summary
Total assets (things you own)........... 47,800
Total HP & Secured debt................. -69,000
Total Unsecured debt.................... -3,000
Net Assets.............................. -24,200

PippaGirl_2

No, that is not correct. You must declare DLA but it is not taken into account as income by the OR as it is for the disability expenses but it is income and must be declared.