BR/OR/joint mortgage!

Locohoco84

hi, this is kind of a BR/mortgage question so apologies if in the wrong section.

I have a joint mortgage with my ex-wife. She was responsible for making all payments to the mortgage, however stopped paying in August this year. She told me she was going bankrupt, and as I was not in a good financial position I was not able to pay the mortgage. After not speaking to me for 3 months, she's finally answered my calls and said that yes she still is going bankrupt, and that she won't be paying the mortgage and wants to have the house voluntary repossessed. Neither of us live in the house - I live with family and she lives in her BF's house.

My options then it seems are let the house be voluntary repo'd, or to take on the mortgage myself. However I need any information on these issues:

1, how does the mortgage lender sell the property if its vol. repo'd? if its auction then it could go for a low price?
2, if I took over the house, and she does go bankrupt then how would the official receiver determine her beneficial interest? the last valuation of the house was about 16 months ago at £95995 (it was put on the market and dropped to ~£93k however would not sell), and the mortgage is about £91k plus £1500 in arrears.
3, assuming her beneficial interest was low, would I be then given the option to buy her share? and if I did, how would this work with the mortgage company, as they won't let either of us take our names off the mortgage as the LTV needs to be 85% to do so.

As an aside, how long does a bankruptcy take to process? She said she was doing it through Citizens Advice 3 months ago. For extra info, the reason she's told me for the BR is that she's pregnant and due to give birth in the next couple of weeks, so even though she gets full maternity pay for several months, it seems she's planning not to go back to work? She won't pay anything to the mortgage as she's saving for the baby. It doesn't make any sense to me. She also had a tenant in for the last 6 months, who just left a couple of weeks ago, however she said that he didn't pay for the last 4 months...

I have sought legal advice - free and paid- and so far its all been useless unfortunately, so any info would be greatly appreciated.

tiggerbodhi

Sorry to hear of your situation, very similar to mine, the issue is that you cannot jsut ahve your name "taken off" a joint mortgage, even if you buy back any beneficilal interest from the OR (this would require her co-operation as well, from what you intimate this may not be easy) to get the mortgage in your name only you would need to get a new mortgage to apy off the whole of the old one, possibly not easy with the current climate and an association to a BR.

If the house is voluntary RP the mortgage company is oblidge to get the best price for it, they normally market via an estate agent but it will be sold for the first offer that comes in (mine was 12% below valuation) and they will add costs to this, so I suspect there will be a shortfall once sold, this debt will be half each, but if she is BR the mortgage company will come after you for the lot, the one thing that may happen (it did in my case) is that the shortfall is low enough (mine was £5K) that the mortgage company will write it off if you are lucky.

The actual BR process technically is how long it takes to fill out the forms and give it to the court, locally here you could do it in a day, IMHO 3 months does seem a long time unless there is a business involved, I was employed, had a house going through Vol repo, and from talking to CCCS, filled the forms out, checked by the CAB to leaving court a happy man was two weeks.

Good luck with your future.

PippaGirl_2

Just to add, you say your stbx was responsible for making all the mortgage payments to date. I'm not sure how long that has been the arrangement or who put in the deposit/equity at the time of purchase but that will be a mitigating factor in who owns the equity in the property when it is repossessed or if you want to buy out the BI. You may end up paying all the BI to buy it out if the equity is deemed to be all hers.
Unfortunately if it is repossessed and she does go BR, then you solely will be responsible for any shortfall on the sale of the property.

Locohoco84

Thanks for your replies!

The original deposit was split equally between us, and we equally contributed for the mortgage payments for the 5+ years before we divorced. After that an informal agreement was made, with her offering to pay for the mortgage as it was her decision to stay in the house and as probably due to a bit of guilty conscience. She paid for it by herself for just over a year so I assume the OR would take that into account for the BI.

tiggerbodhi - how did you find the process of voluntary repossession? Did the house sell relatively quickly, and were there any issues with the valuation? I am just very wary of a large shortfall, and even further arrears while the house is up for sale.

I guess then as I'll be unable to get another mortgage even if I buy her out of her share, that I won't be able to go down that route. As I understand it I'll need to hope that the house sells for a decent price in order to avoid BR myself.

tiggerbodhi

Hi Voluntary Reposession was fairly painless for me, told the Mortgage company intended doing, they sent a form out, check this in case it states that you are responsible for any shortfall even if you go BR, got both my Ex and me to sign the form, emptied the house, moved out, locked up and posted the keys back recorded delivery, they acknowledged the keys, they then "took posession" by changing all the locks, at this point you can stop paying buildings insurance, council tax and utilities.

They they put a company in to clear out anything left behind, !!!!less ex left loads of her stuff that ended up in landfill, then put it on the market with a local estate agent, it was valued and marketed at £220K, they then accepted an offer of £195K after three months, you then get a final statement giving the mortgage owing, cost of sale (estate agent fees, legal fees, locksmith etc) against the sale price, the difference is either given to you or expected to be paid by you depending on whether you have negative equity or not.

As I intended to go BR any shortfall was going to put into my BR, so TBH didnt care what it sold for and for my own sanity it was the best option to walk away rather than try to keep on living there and sell it myself.

Mouse1812

Locohoco84 wrote: »

Neither of us live in the house

The property is not therefore “the family home” and will be non qualifying .

“Unlike dwelling-houses that are the sole or principal residence of the bankrupt, his/her spouse or civil partner, former spouse or former civil partner, and subject to the provisions of the Insolvency Act 1986 section 283A the insolvent’s interest in non-qualifying property will remain in the estate until it is dealt with.”

and

“One way for the official receiver to deal with a bankrupt’s interest in a jointly owned property is to sell that interest.”

From the figures given you appear to have very little or no equity. In which case the OR will do nothing. It makes no difference who contributed what, those contributions have already been lost if the cost of selling and repaying the mortgage exceed the property’s value.

As a non qualifying property, your ex’s beneficial interest in it will stay with the OR until the property is eventually sold, even if that is 20 years down the road. Not good if you have repaid significant amounts off the mortgage and they then try to claim 50%.

While the OR can sell the BI to you, they would only do so if it was in the interests of your ex’s creditors to do so. As a minimum expect this to be about £1,000 plus legal fees.

If you can afford this and to then take over the mortgage you would have joint legal ownership and 100% beneficial ownership. Obviously undesirable to have the ex on he deeds (who cares about the mortgage) but as others have pointed out, little you can do about it unless she is prepared to sign a declaration renouncing any future claim. Again not good if you subsequently pay significant amounts off mortgage and the she comes sniffing to claim 50%.

Whilst both potential claims could be rebutted do you fancy the risk of future battles?

Your best option might therefore be to sell ASAP and repay the mortgage. If you retain control over the process you should be able to secure a better financial outcome. It might be far better for you to then come to some arrangement over the final (small) shortfall than face bankruptcy yourself.

You need to talk to the ex and get her to agree to the sale.

Doing nothing and allowing events to take their course is your worst option. The property will be sold for less, additional eye watering cost will incurred and you will be expected to pay.

Was the legal advice (free and paid) any better than this?

Locohoco84

Actually your info is a lot more thorough than the legal advice I got! I was told that basically there was no way to know what value the OR would put on her BI on the house, and that they couldn't really do anything about the situation without more information (not easy to get when my ex wouldn't speak to me for 3 months).

My problem is, she will not make any contributions to the mortgage or the arrears. I could clear the arrears by shifting it to a credit card, and if I cut everything and make minimum repayments on my other debts I can literally just afford the mortgage. I don't think I could keep that up for long though.

So if I were to do the above, I could have 2 options:
1 Sell the house ASAP
2 Keep it, and buy the OR out of their share

In the case of #2 (also #1 in the case of a protracted sale), can you clarify what would happen if I couldn't/didn't buy her out of her share?

I am leaning more to option 1, as keeping the house just seems so much trouble. It's quite difficult to weigh up the overall cost of both ways.

Mouse1812

If there is no equity there is no (value in the) BI.

That’s the problem with legal advice, most solicitors can’t cope with primary school maths, and the concept of negative numbers, well that’s voodoo stuff.

You couldn’t sell at £93k and the mortgage and arrears are £92.5k. £500 won’t cover the selling fees. Looks negative to me.

Selling the house will involve costs; estate agent, solicitor (conveyancer) and perhaps mortgage redemption fee. The OR allows 3% of property value to cover these. Might be a bit on the high side, but let’s go with that for now.

If you can sell for say £90k then after fees you might expect £87.5 to be cleared off mortgage leaving you with a £5k shortfall to pay.

If you choose to keep it and buy the BI back from the OR it might cost you about £1,500. From what you say it sounds like paying the mortgage thereafter would be very tight. That would be pointless if you end up having to sell anyway. Unless however you can rent the property out. Would the rentals be big enough to cover the mortgage?


If you don’t buy out your ex’s share the OR will do nothing to force a sale. There is no point if they will not get paid anything. They will however put a caution on the property at the Land Registry to stop you selling without their agreement.

If, for example, you then rented the property out the OR would claim half the rents being the OR’s share of the investment income. No allowance would be made for the mortgage. The OR will quite happily collect the rents and allow the mortgage to go into arrears until the mortgage company repossess. You will then be left with the biggest bill going.

It might be better for you to move back in now - make the property your home BEFORE she goes bankrupt. That would make the property a qualifying home (because she is your ex WIFE*). Different rules apply then and after three years if there is still no equity her BI goes back to her.

Have a good read of this

and then these pages

*ps to add if she was just an ex girlfriend, not ex wife or ex civil parter then the property would never qualify as a family home

Mouse1812

Here's a plan for you:

Move back in, make it your home before the ex goes bankrupt. Pay the mortgage for a while. Then buy back the BI from the OR (must do this first) ASAP - make offer immediately after ex's BR. Once the BI is all yours move out again and rent it to someone to pay your mortgage. The OR will have no claim on the rents then.

Important, do not under any circumstances move out before you have done the deal with the OR, the property would at that point cease to qualify.

Mouse now puts on flack jacket and waits for debtinfo and others ...

Locohoco84

This is confusing stuff, so thanks for the advice, its really appreciated.

So I think if I were to move back in, then I could just about afford it given I would no longer be paying rent to my family, and there's a slight possibility of a house share which would ease the burden somewhat.

However with regards to the figures in your earlier post, I would have to clear the arrears when I restart paying the mortgage, so the OR would see an extra 1.5k value on the house. Would this impact the value of BI much?

I assume the difference made by me moving back in is that then the OR would have to accept my offer when its made? I have had a read through those links but my brains fried at the minute and I'm struggling to comprehend it fully.

Basically my choices amount to (please let me know if I've got this right):
1 - voluntary repossession, ex goes BR, I get bill (eventually), I go BR
2 - move back in, clear arrears, pay mortgage, wait for ex to go BR, buy out the BI from the OR (estimated cost about £1.5k?), then I can rent it out after.

So both expensive routes but at least with #2 I'm still in control and I shouldn't have to go BR.

EDIT:
Just to add - the rent I can foresee receiving would amount to about £320/month after tax, and the mortgage is about £100/month more than that. So selling may be better? If I were to sell the house anytime during the 3 years of her BR (after I bought the BI from the OR), then would I be solely responsible for the profit/shortfall that it made?

Sorry for all the questions!

Mouse1812

Hi, i'll post an answer within the hour ... got to do something else first