Secured debt following bankruptcy

debt_doctor

From the Insolvency Service.........

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 could
make 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 any
shortfall 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'

DD

whiskey20b

Thanks again everyone!

DD could you please put your last entry into layman's terms for me, I'm not used to the correct terminology!

Crossed entries there DD... I read that from the IS which reinforced what I believed I was just worried that a "specialist" at the firm of solicitors I went to looked at me like an eejit when I told him I wasn't liable...I even showed him an e-mail which had that entry you posted almost verbatim

fermi

The shortfall is a bankruptcy debt as defined in The Insolvency Act 1986:

http://www.legislation.gov.uk/ukpga/1986/45/section/382

“Bankruptcy debt”, in relation to a bankrupt, means (subject to the next subsection) any of the following—

(a) any debt or liability to which he is subject at the commencement of the bankruptcy,

(b) any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commencement of the bankruptcy,

The only way it would not be covered, is as said, if you had signed a deed of acknowledgement.

http://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch25-36/Chapter31/part3/part1/part1.htm#31.3.36

31.3.36 Re-scheduling of debt and deeds of acknowledgement A mortgagee or other secured chargeholder may request the bankrupt to sign a document acknowledging the level of debt, shortfall or similar. Such a document is generally known as a deed of acknowledgement. This might be in connection with an arrears repayment plan or a re-mortgage (see paragraph 31.3.35).

If the bankrupt completes such a deed, a new debt might be created on which recovery action might be based at any time within the limitation limit. It is not for the official receiver to influence the bankrupt about how to proceed in this matter. The bankrupt should simply be advised to seek independent legal advice.

Whilst a post bankruptcy debt can be created by rescheduling and deed, the underlying debt it is still a bankruptcy debt.

fermi

If you haven't signed such a deed, then the shortfall is covered by your by whether the creditors involved like it or not.

whiskey20b wrote: »

Both Northern Rock and the second charge, First Plus have said in telephone conversations that I am still responsible!

Should have known it was those two. They have got to be the worst offenders for telling people this complete load of bull. I think it must be in their phone scripts or something, but it doesn't make it true.

whiskey20b wrote: »

Crossed entries there DD... I read that from the IS which reinforced what I believed I was just worried that a "specialist" at the firm of solicitors I went to looked at me like an eejit when I told him I wasn't liable...I even showed him an e-mail which had that entry you posted almost verbatim

They need to find a new "specialism" then, as they obviously know **** all about bankruptcy. :eek:

fermi

whiskey20b wrote: »

DD could you please put your last entry into layman's terms for me, I'm not used to the correct terminology!

Unless you have signed a deed of acknowledgement after your bankruptcy, Northern Rock and First Plus can take a long walk off a short pier.

whiskey20b

Thanks again everyone that's a weight off my shoulders

alastairq

I also suggest, the 'specialist' you talked to, was more annoyed that you had taken the one course of action, previously, that rather makes a nonsense of everything they are about to tell you?

Divorce is peanuts compared to the power of a Bankruptcy Order.

I've done 3 divorces......[serial wedding-cake-admirer?]....first was done 'through solicitors'...and cost what was then an arm-and-a- leg....although no ongoing financial problems then...[no kids]....

The second, I did myself, via my local Court....they were incredibly helpful....again, no kids of a certain age....cost a fraction of the first one, even though some 15 years later....all fees paid, were simply Court admin. fees....and the Court Office talked me through each step over the phone [pre-tinternet]...

The third, was done using Legal Aid [XOH became the appellant in this case......as she was the one who qualified for legal aid]....all very painless......I still talk, birthday cards, etc with them all....the kids ensure I have extremely regular contact.

I suppose it all depends on what the grounds are? Living apart for 2 years is the easiest one.