house

Bella_Smythe

hello peeps. we're still trying to figure out our best option. we will almost certainly be going br in the new year. originally we thought we didnt want to keep out house, we've a mortgage and about £20-£30,000 negative equity. but we're getting worried now about being able to rent as BRs, also private renting can be precarious i know and i dont think we'll get council or housing association property.
so what would happen? i guess the OR wouldnt be interested because of the negative equity. so would we just pay interest-only to the bs like, for ever? same as renting? and if the beneficial interest (whatever that is) was 'vested' back to us would we then be reponsible for the shortfall again? its so complicated?
Thanks B

silvercar

Forever is a long time.

First question is what do you want to do now? Do you want to remain in your current home? How does the mortgage plus essential maintenance compare with local rents?

Bella_Smythe

we would prefer to move but worried about the insecurity of renting?
we pay £545 monthly which is interest-only. its a 3-bed. we only need a 2-bed now could rent one in our village for maybe £400 and upwards, or in Hull for £300 upwards (dont really want to move into hull though)?
if we dont let the property go with the br, will we be stuck with it?

Mouse1812

Bankruptcy only deals with unsecured debts. However any shortfall on sale of property (even long after discharge) will be included in the bankruptcy so long as you have NOT remortgaged or signed any agreements that you will be liable for the shortfall.

So the good news is you can stay put, just don’t sign anything for the mortgage company. If it does not work out, you can move on later.

Bella_Smythe

Mouse - so if we stay put and dont sign anything, how would we go about moving at some future date? would we have to try to sell or could we just walk away and let the bs re-possess? its all such a confusing minefield? B

Mouse1812

just walk (or dance!)

Bella_Smythe

ok, just to clarify, the bottom line is
we will definately be going br some time in 2013 although havent figured out the timing yet. it would be easier to stay in our house FOR NOW. less hassle.
BUT, what we absolultely dont want is to be stuck with a hard-to-sell house and negative equity, which is the position we're actually in now prior to BR. when dh finishes his degree we'll hopefully be moving out of area. so is it definate that after br we cant again be responsible for the neg equity, even if 3 years have passed and the 'beneficial interested has been vested back to us' whatever the hell that means!!!
thanks B

Mouse1812

Correct

Re Beneficial Interest - On bankruptcy the legal title (names on deeds) will stay with you, but any net value (beneficial interest) belongs to the OR. The OR will place a warning at the land registry to this effect. It means while you could try and sell the house any one paying you for it would be told not to pay you but to pay the OR. It is a bit like you are holding the property on trust. While the beneficial interest does revert after three years if the OR has not otherwise dealt with the house any subsequent shortfall can be included in the past bankruptcy - so long as you have NOT remortgaged or agreed otherwise with the mortgage company. Hence the advice - Don't sign anything.

I'll come back with a link for you ASAP

Mouse1812

FAQ from Insolvency Website:

Question: If my house is sold sometime after the bankruptcy order is any shortfall on the mortgage still a debt in my bankruptcy?
Answer: A debt which is secured by a mortgage or a charge on a property is still a provable bankruptcy debt. The mortgage loan company is "a secured creditor" which means they have rights over an asset, the house, and can require the asset to be sold to pay their debt. These rights are not affected by the bankruptcy. On the making of a bankruptcy order the mortgage loan company couldmake a claim in the proceedings but, unless it wished to give up the security, could only claim for any (estimated) shortfall.

If you continue to live in the property it is likely that you will continue to make payments to the mortgage loan company to avoid the property being re-possessed. When the property is eventually sold anyshortfall to the mortgage loan company is still a provable debt in the bankruptcy, even if you have been discharged, as you are released from the debt on discharge.

Your bankruptcy does not affect the obligations of any joint owner who has not been made bankrupt to repay the mortgage loan debt or any shortfall, as they are still liable for the whole of the debt.

After the date of the bankruptcy order the mortgage loan creditor may ask you to sign a "deed of acknowledgment" of the outstanding debt. If you have signed such a deed the mortgage loan creditor can take action against you to recover any shortfall following the sale of the property.

You may also find it helpful to read the Insolvency Service publications titled 'What will happen to my home'