Bankruptcy and voluntary reposession

koolrain152

Hi All,

I really hope someone on here can help me out with some good advice.

Here is a little background on my situation.

Basically, I don't have any unsecured debt at all as I have always hated the thought of debt. If I needed a car I saved up, if I needed a holiday I saved up etc. and I hate credit cards.

However, I made the biggest mistake of my life in 2006 when I decided to buy a house.

At the time I was in a good job earning about 35000 a year. I am single and all my income was disposable. "You have to buy a house now before it's too late!" - so I did, the biggest mistake of my life.
I bought a house for £143000 in April 2006. I lost my £35000 pa job a few months later and had to take another for £20000 pa. I lived on in the house for a while then moved in with my parents and rented the house out when it became unsustainable.

I remortgaged in 2008 and went for a 3 yr fixed interest only mortgage at 5.5% as it was the only one I could get at the time. After moving onto the SVR in May 2011 I have been watching the market trying to decide what to do.

I decided to sink in my life savings of £16000 to try to reduce the interest payments in Summer 2012. I saved up another £2000 and paid it off in the new year just past.

I currently owe £125000 on this house now. The house has been valued at £85000. So after sinking in £18000 (all the money I have basically) I still have £40000 negative equity to pay off.

Having brought the interest payments down slightly, for the first time since I have bought this house the rent covers the interest payments, rates and insurance, approx. £550 per month.

Basically, I have decided that I can’t afford to pay off this house. I’ve been living with my parents for almost 6 years. I can’t live there for the next 10 years waiting for the housing market to recover. I don't really care about the house, I rue the day I ever stepped over the threshold. I don't even care about my savings...I can write those off. I just want to hand over the keys and walk away….but as far as I’m aware I can’t declare myself bankrupt as I have no other unsecured debt? Is this correct?

Or can I just stop paying the mortgage and wait until the lender comes after me for the shortfall and then declare bankruptcy?
I don’t like to do this but I’ve just had enough.

Oh, and I live in Northern Ireland. Not sure if that makes any difference.

Thank you all for any help in advance.

IF

Hi koolrain152 and Welcome to the Bankruptcy (BR) Board. Until other posters can advise further re your property please do the first step, make a list of all your creditors, debts and assets. Secondly and most important is contact one of the following debt charities. Please try these they don't charge and are impartial. They will go through all your options with you and if they suggest bankruptcy then come back to this board and we will help you all we can. Also if your not ‘clicking’ with one of the Debt charities do try another. We advise you to try at least two others for your own piece of mind. Your BR could be refused if you have not sought advice. (Advice on here does not count, this has to be from one of the Debt Charities, an IP, an Accountant or a Solicitor. The Judge just wants to be sure that you can never come back and try and overturn the order on the basis that you were not aware of all the consequences).


* Blue text on this forum usually signifies hyperlinks, click on the blue links below *

Advice 4 Debt NI - http://www.advice4debtni.com/

StepChange Debt Charity (Was CCCS) - http://www.stepchange.org/Debtadvice...rnIreland.aspx

CAB - http://www.adviceguide.org.uk/nireland.htm


For information in Northern Ireland you should contact The Insolvency Service of Northern Ireland at:

The Insolvency Service
Fermanagh House
Ormeau Avenue
Belfast
BT2 8NJ

Tel: 02890 251441

N.I. Direct - Click here

Online forms - http://www.detini.gov.uk/deti-insolvency-index.htm

NI FACT SHEET - www.hmrc.gov.uk/factsheets/ef5-ni.pdf

Best wishes
IF...x

hildosaver

You have my sympathy mate, I'm also from Northern Ireland and am currently in around £20,000 negative equity in my own house - I bought my house in 2009 for £132000 and it is now worth around 95-100k. I am dealing with the situation by overpaying my mortgage as much as I can afford each month, I now owe £118,667 and if I overpay by the amount I'm planning to, I should owe around £100k within 2 years which should put me close to being out of negative equity.

I realise that this might not be a possible solution for you but I'm making the choice to spend all my spare cash over the next few years on paying off the mortgage. You said that now you are breaking even with the house rented out, that's good news but my advice is to simply do what I am doing, every little helps - even an overpayment of £50-100 per month can make a difference over time.

koolrain152

Thanks IfIWereHorses....I'll have a look at those links and see about going to talk to one of the debt charities

koolrain152

hildosaver wrote: »

You have my sympathy mate, I'm also from Northern Ireland and am currently in around £20,000 negative equity in my own house - I bought my house in 2009 for £132000 and it is now worth around 95-100k. I am dealing with the situation by overpaying my mortgage as much as I can afford each month, I now owe £118,667 and if I overpay by the amount I'm planning to, I should owe around £100k within 2 years which should put me close to being out of negative equity.

I realise that this might not be a possible solution for you but I'm making the choice to spend all my spare cash over the next few years on paying off the mortgage. You said that now you are breaking even with the house rented out, that's good news but my advice is to simply do what I am doing, every little helps - even an overpayment of £50-100 per month can make a difference over time.

Thanks for the reply I was planning to do like you originally and just knuckle down and pay off the debt when I thought my house was worth about 100K. When I was advised it is more likely in the region of about 85-90K I almost flipped. I'll speak to the debt charities and see what they recommend. I could spend about the next 4 years giving all my cash to pay off this debt. That's 4 years of my life which will mean I've spent my entire 30s paying off this debt with nothing to show for it.

I know bankruptcy is not an easy option either but I just can't get my head around the size of this burden.

hildosaver

Well remember that you would be paying off the mortgage for the next 20-30 year's anyway so you need to think long term. Overpaying (if you can afford it), although you might see it as throwing money away will reduce your monthly payments which in the long term will save you a lot, also I believe that the market in Northern Ireland should start to recover in around 5-8 years, so if you can look 10 years ahead for example you COULD be in a much healthier position, lower monthly spend and equity in the house. It is long term thinking though and would take a serious commitment. I have decided that it will work for me though I know if might not suit your circumstances

JimmyTheWig

Sorry to hear about your negative equity. I hadn't realised that prices had plumetted in NI so drastically. With drops like that, if it's any consolation, there must be many others in the same boat as you!

Now, on to what I suggest...

koolrain152 wrote: »

Having brought the interest payments down slightly, for the first time since I have bought this house the rent covers the interest payments, rates and insurance, approx. £550 per month.

This is brilliant news. What's to stop you carrying on like this?
Obviously with this mortgage you won't be able to get another one right now to buy another house. But (a) you certainly wouldn't be able to do that if you were bankrupt and (b) I would imagine that after this experience you wouldn't want to right now.
What you are saying is that you have the same amount of money each month now as you would have if you didn't have the house. So if you could afford to move out and rent, enjoy your life, etc if you didn't have the house then presumably you can do the same now?
Assuming interest rates don't change and rents rise with inflation, over the next few years you should start to make a small profit on the place.

What do you think you'd gain from bankrupcy?

koolrain152

hildosaver wrote: »

Well remember that you would be paying off the mortgage for the next 20-30 year's anyway so you need to think long term. Overpaying (if you can afford it), although you might see it as throwing money away will reduce your monthly payments which in the long term will save you a lot, also I believe that the market in Northern Ireland should start to recover in around 5-8 years, so if you can look 10 years ahead for example you COULD be in a much healthier position, lower monthly spend and equity in the house. It is long term thinking though and would take a serious commitment. I have decided that it will work for me though I know if might not suit your circumstances

To repay is probably the sensible thing to do. I could live with that if my house even got to about 105-110000 in the next five years, i.e. at least meet me halfway!!

However, over on house price crash dot com they seem to reckon that prices haven't even bottomed out yet and they've mostly been right so far about the NI housing market as far as I can tell.

koolrain152

JimmyTheWig wrote: »

Sorry to hear about your negative equity. I hadn't realised that prices had plumetted in NI so drastically. With drops like that, if it's any consolation, there must be many others in the same boat as you!

Now, on to what I suggest...

This is brilliant news. What's to stop you carrying on like this?
Obviously with this mortgage you won't be able to get another one right now to buy another house. But (a) you certainly wouldn't be able to do that if you were bankrupt and (b) I would imagine that after this experience you wouldn't want to right now.
What you are saying is that you have the same amount of money each month now as you would have if you didn't have the house. So if you could afford to move out and rent, enjoy your life, etc if you didn't have the house then presumably you can do the same now?
Assuming interest rates don't change and rents rise with inflation, over the next few years you should start to make a small profit on the place.

What do you think you'd gain from bankrupcy?

Thanks for your reply Jimmy, much appreciated. Well, what you are saying is technically correct, I do have the same amount of money each month now given interest is taken care of but I also have negative equity of about 25-35K (having already thrown in 18K). Living as I am now I can pay off £800/month of this debt but that is living a frugal life. Scraping, no car, living with parents, watching every penny.

What do I hope to gain from bankruptcy? Well, I would hope to be able to get rid of my house (by repossession) and then write off the shortfall by bankruptcy. I don't know if this is possible which is why I was hoping to come on here to find out info. Is this even possible? How long for repossession? How long in bankruptcy? etc.

I don't care much about my credit rating. I can live a debt free life after bankruptcy. I never want another mortgage in my life. I think it's a racket to be honest and I got sucked in hook, line and sinker...

hildosaver

From what I can tell you can pay off £800p/m off the mortgage right now, yes it means you will have to sacrifice a lot and live a frugal life but the benefits in the long run would be worth it imo. If you go down the bankruptcy route you will start afresh yes, but you will be unlikely to get a mortgage for another 7 years (yes I know at the moment you don't want one, but you might in the next few years - things change) - imagine you go bankrupt, you start again and save for the next 6-7 years and get yourself a lovely big deposit - I reckon the housing market will have stabilised by then and perhaps improved from how it is now - you need to decide is it worth the hassle of going bankrupt to then save money and struggle to get any credit in that time when you could be doing pretty much the same thing but while owning a house and steadily paying down what you owe on it - you say you could pay off £800 a month - lets say you pay off £600 a month instead for the next 7 years which from what I understand is how long it takes for a bankruptcy to get off your credit record (could be wrong) - that equals £50400 - now if you save that throughout your bankruptcy it would be a healthy deposit for a house (if you choose to get one) or it would be £50400 off the amount owed on the house you currently have, you have to decide whether in the next 7 years you think the housing market in Northern Ireland will recover at all, I think it will (though it may take a few years to start moving again) - do you want to have a big deposit on a house in a market that may be moving upwards again or do you want to have £74600 owed on a house that COULD be worth a good bit more than that.

It's impossible to know what will happen in the future but it's something to think about. Personally if I had the house rented out and it was covering all the costs of the house, I would be content with that - but would be making as big overpayments as I could so that I could potentially start making a little bit of money from it, the more you work at bringing down what you owe on the house, the better it will become.

koolrain152

hildosaver wrote: »

From what I can tell you can pay off £800p/m off the mortgage right now, yes it means you will have to sacrifice a lot and live a frugal life but the benefits in the long run would be worth it imo. If you go down the bankruptcy route you will start afresh yes, but you will be unlikely to get a mortgage for another 7 years (yes I know at the moment you don't want one, but you might in the next few years - things change) - imagine you go bankrupt, you start again and save for the next 6-7 years and get yourself a lovely big deposit - I reckon the housing market will have stabilised by then and perhaps improved from how it is now - you need to decide is it worth the hassle of going bankrupt to then save money and struggle to get any credit in that time when you could be doing pretty much the same thing but while owning a house and steadily paying down what you owe on it - you say you could pay off £800 a month - lets say you pay off £600 a month instead for the next 7 years which from what I understand is how long it takes for a bankruptcy to get off your credit record (could be wrong) - that equals £50400 - now if you save that throughout your bankruptcy it would be a healthy deposit for a house (if you choose to get one) or it would be £50400 off the amount owed on the house you currently have, you have to decide whether in the next 7 years you think the housing market in Northern Ireland will recover at all, I think it will (though it may take a few years to start moving again) - do you want to have a big deposit on a house in a market that may be moving upwards again or do you want to have £74600 owed on a house that COULD be worth a good bit more than that.

It's impossible to know what will happen in the future but it's something to think about. Personally if I had the house rented out and it was covering all the costs of the house, I would be content with that - but would be making as big overpayments as I could so that I could potentially start making a little bit of money from it, the more you work at bringing down what you owe on the house, the better it will become.

Thanks for your post hildosaver. I think you're probably right...I have to think very hard about what to do with my situation. I think I'll start with another valuation of my house (a second opinion is always helpful).

What I do fear is the interest rates moving upwards...I should be about £50 better off each month than I am but the bank moved the interest rate up 0.5% just a few months ago.

Does anyone know if Judges would accept shortfall in bankjruptcy cases or would they just tell you to cough up? I suppose it depends on your individual circumstances?