Secured Loan & Bankruptcy

yeldray1971

Hi,

I have recently been declared bankrupt and I currently have a loan secured on my property although I am in negative equity. Therefore, my monthly payment cannot be included in my monthly income payments calculation. See below:

31.7.89 Payments to additional secured creditors

(Amended April 2011)

Where there are additional secondary secured creditors the official receiver should take into account all payments to be made. Where there is no equity available to secondary charge holders, the official receiver should not include any payment to these creditors in an income payments calculation as there is no enforcement action that can be taken in respect of these debts as the asset is already fully charged, and as, in effect, the secondary charge holder is an unsecured creditor, any payment to it could be considered to contravene the provisions of section 285(3) of the Insolvency Act 1986.

Meanwhile the loan company are asking me whether I plan on paying them or not. My answer to them is that I cannot pay as it cannot be allowed for and I have to pay the money into the bankruptcy instead as it is now classed as "left over income". The loan company are now also included on my list of creditors.

Does anyone have any experience or advice on this as my home is now at risk of being repossessed.

Any help will be very much appreciated.

minic

Hi Yeldray1971,

I'm assuming you are intending on staying in your house rather than letting the shortfall from any sale of the property fall into the bankruptcy?

Did you receive any advice e.g from CAB before going BR and did they not inform you that any payments to secured creditors would not be allowed when calculating an IPA?

Is it likely that once you disregard the secured payments you will have an excess available to pay into an IPA? Do you own the property/live with anyone who would be able to pay the secured loan payments?

Given that you're in negative equity I can't see why the second charge holders will try and force a sale of the property as they won't get a penny and if you're in negative equity such that any sale wouldn't cover the first charge (mortgage) then the mortgage company probably wouldn't agree to the sale anyway.

I too have a secured charge on my home and went BR last year. The OR told me that any secured loan payments would not be allowed when calculating an IPA but I am lucky in that my OH covers the cost anyway. I hope someone comes along soon who may have some ideas about what you can do.

M

yeldray1971

Hi M. Thankyou for your reply.

Hi Yeldray1971,

I'm assuming you are intending on staying in your house rather than letting the shortfall from any sale of the property fall into the bankruptcy? Yes, I do plan on staying in my home.

Did you receive any advice e.g from CAB before going BR and did they not inform you that any payments to secured creditors would not be allowed when calculating an IPA? Yes, I did receive help from an independent company which I paid a lot of money to. My situation was complex so I decided that this would be the best way forward. BUT,They did not make me aware of this problem and allowed for the monthly loan payment within their initial calculations.

Is it likely that once you disregard the secured payments you will have an excess available to pay into an IPA? Do you own the property/live with anyone who would be able to pay the secured loan payments? That is correct, I now need to pay £168 per month into an IPA for 3 years. I live on my own and the mortgage is in my name only.

Given that you're in negative equity I can't see why the second charge holders will try and force a sale of the property as they won't get a penny and if you're in negative equity such that any sale wouldn't cover the first charge (mortgage) then the mortgage company probably wouldn't agree to the sale anyway. Its a gamble I suppose but my home is at stake. The secured loan has £11000 outstanding and would be a large weight off my shoulders once I am discharged. I would be better off by paying the IPA for 3 years but its the not knowing what will happen to my home which I love dearly.

I too have a secured charge on my home and went BR last year. The OR told me that any secured loan payments would not be allowed when calculating an IPA but I am lucky in that my OH covers the cost anyway. I hope someone comes along soon who may have some ideas about what you can do. Me too. Thanks again M.

M

minic

Just a quick thought, is there any room in the expenses which have been allowed for (groceries, clothing, sky, holidays etc..) in your IPA that you could use instead to make payments to your secured loan lender? Even at a reduced rate to avoid them taking any action?

M

minic

Just another quick thought! Have you already signed the IPA? I'm wondering whether it may be worth disagreeing with the IPA so the OR has to apply to court for an IPO. I think this would only be possibly worth doing if your mortgage + secured loan payments come to no more than a 1 bedroom property in the area would cost to rent as if you were to lose your home you'd have to go into rented and if this cost more or the same as your current mortgage + secured loan you wouldn't have anything to contribute to an IPA anyway. Might be worth arguing in court on these grounds.

If your mortgage + secured loan is more per month than rent I think your chances of success in challenging the IPA would be minimal.

yeldray1971

I could dip into my living expenses but I do no not have luxury items like Sky etc. My mortgage payment is £1250 per month. The monthly payment for the loan is £170. Also, the IPA has been signed I'm afraid and I would not want to upset the OR.

I have been honest throughout my BR and have already lost my car and a tatty but well loved boat but I accept that this is a small sacrifice to pay compared to the total BR amount and so I was ok with that.

So confused at the moment on which way to turn. If I decided to pay the loan as well as my IPA ok I get to keep my home whilst cutting my cloth down even further. BUT, I could just include the loan in my BR and take the risk. I was hoping for some reassurance that I would be making the right decision if I went down this route as surely as you say they would not gain anything by making me sell my home. I still feel guilty & embarrassed of my BR situation but I also do not want to fall into a trap of paying something that I don't need to. Thanks again.