Moving to rented accommodation - guidance needed

fermi

silvercar wrote: »

If the house sale - post repossession - took place after bankruptcy it is unlikely that you could include that money in your bankruptcy and it would be a new debt. I say unlikely because I am not sure how definitive that is; if you were already in negative equity at the time of the bankruptcy it is more likely that the debt could be considered as part of the bankruptcy.

I tried to find an answer to this the other day and found in the 'Officials Receiver's' documentation:

Where there is a shortfall on the sale of the mortgaged property, the mortgagee becomes an unsecured creditor for the remainder of the debt.
Where a property is sold after the bankruptcy order the mortgagee’s proof must be limited to what was due for principal and interest at the date of the bankruptcy order after deducting the proceeds of the sale

Which basically says that if the house is sold after BR, the negative equity becomes a debt that is included in the bankruptcy.

That is my interpretation of it, but it would be nice if anyone with direct experience could confirm/deny.

despairofhands

Thanks for that everyone. I contacted the Insolvency practitioner that I had previously spoken to to to check on the property position, as I was concerned that there would be a potential debt if the house was repossessed after bankruptcy. She has just come back to me and says:

"The mortgage shortfall will be caught in the bankruptcy therefore leaving you to make a fresh start. "

If you require any further guidance please do not hesitate to contact me.

So, it looks like that this is ok, as I couldn't get repossessed before bankrupcy - too much agony in prolonging this.

I have booked my BR date this morning for myself and my wife. They offered me next Wednesday!! which was abit scary as this wouldn't allow us time to get sufficient cash together to cover a buffer amount until we know where we stand re: benefits and also the BR fees. So I am booked for the following week - 26th June.

The processes have just been changed here and after submitting the forms, you are sent away and the OR calls on the same day to interview or book an appointment if necessary. I am kind of hoping that he upsurge in bankruptcies has put too much pressure on the courts and they are looking to deal with these things as quickly as posible to get them off their books unless there is some obvious wrongdoing. Here's hoping.

I will no doubt be in touch when I come to tackle the mighty online forms.

Cheers

Despairofhands

fermi

despairofhands wrote: »

Thanks for that everyone. I contacted the Insolvency practitioner that I had previously spoken to to to check on the property position, as I was concerned that there would be a potential debt if the house was repossessed after bankruptcy. She has just come back to me and says:

"The mortgage shortfall will be caught in the bankruptcy therefore leaving you to make a fresh start. "

Glad you found out for definite.:D

It sounded like the most common sense position, and all the evidence I could find pointed that way, but it's nice to hear it confirmed first hand.

Good luck with everything. It's really not as scary as you imagine.

Richard_S

fermi wrote: »

I tried to find an answer to this the other day and found in the 'Officials Receiver's' documentation:

Quote:
Where there is a shortfall on the sale of the mortgaged property, the mortgagee becomes an unsecured creditor for the remainder of the debt.
Where a property is sold after the bankruptcy order the mortgagee’s proof must be limited to what was due for principal and interest at the date of the bankruptcy order after deducting the proceeds of the sale

Which basically says that if the house is sold after BR, the negative equity becomes a debt that is included in the bankruptcy.

That is my interpretation of it, but it would be nice if anyone with direct experience could confirm/deny.

Hi fermi,

I'm going to check this with our O.R because I'm reading it differently to you and it's an extremely important point for people with mortgages.

The first sentence is unambiguous, any shortfall of a mortgaged property results in the mortgagee becoming an unsecured creditor in the bankruptcy.

What worries me is the second sentence, it refers to the same situation, ie "the sale of a mortgaged property" the only difference being the timing; post bankruptcy date. "The mortgagees proof must be limited to what was due for principal and interest at the date of the bankruptcy" - that to me implies that a new debt has been created that is not part of the bankruptcy, and is "limited to capital and interest at the date of bankruptcy etc etc" meaning that the amount of that debt can't be increased by adding the costs of selling.

It does however mean, that any shortfall on the sale of a property post bankruptcy is not included in the bankruptcy. This is only my interpretation, and I will check soonest.

Regards

Rich

despairofhands

Hi Richard S

I am assuming that the IP I have dealt with knows what she is talking about as she has dealt with this situation on numerous occassions. She did not believe that it was a problem at all. She did give me this indication when we meet previously as well.

If you get a different version from the OR please let me know. It's too late now for me, I am going ahead with BR on 26th of this month now regardless. Logically, it is not included in BR and is treated as an unsecured debt what can they expect you to do about it if you have a deficit of income against expenditure anyway and no assets? It just wouldn't make any sense.

Just my thoughts for what they are worth.

Cheers All.

Travelling to London tomorrow while I still have my car to inform my family of situation. Not loking forward to that one.

despairofhands

Richard_S

despairofhands wrote: »

Hi Richard S

I am assuming that the IP I have dealt with knows what she is talking about as she has dealt with this situation on numerous occassions. She did not believe that it was a problem at all. She did give me this indication when we meet previously as well.

If you get a different version from the OR please let me know. It's too late now for me, I am going ahead with BR on 26th of this month now regardless. Logically, it is not included in BR and is treated as an unsecured debt what can they expect you to do about it if you have a deficit of income against expenditure anyway and no assets? It just wouldn't make any sense.

Just my thoughts for what they are worth.

Cheers All.


Travelling to London tomorrow while I still have my car to inform my family of situation. Not loking forward to that one.

despairofhands

Hi despairofhands,

You're absolutely right in that they can't take what you don't have and if you're on a tight budget it's not going to make any difference to you at all.

The problem is that if you get back into work and you've still got the prospect of a debt, albeit unsecured, lurking around then there's always the prospect that they could take legal action and go for an attachment of earnings.

I'm sure your I.P knows her stuff but it does conflict with the legal advice we were given; somebody has got it wrong and I'd like to know what the facts really are.

Hope your trip to London isn't as bad as you think,

Regards

Richard

despairofhands

Hi All

Things have ben very busy of late but they all seem to be coming together.
Just wanted to report back that I had a reply from the Insolvency Service regarding houses ebing sold after bankruptcy and whether there was any possible debt becuase of negative equity, charges, costs arrears etc.

The good news is that this is all captured in the bankruptcy.
See below:

If the property is repossessed by the mortgagee and is sold for less
than
what it is worth any shortfall, arrears, costs of sale, etc. will
become a
bankruptcy debt from which you would be released on discharge. This is
under the provisions of section 382 of The Insolvency Act 1986 which
says,
relating the definition of a bankruptcy debt:

382 “Bankruptcy debt”, etc

(1)“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
bankruptcy,

Subsection (b) is what applies in relation to what you are asking
about.

So breathe easy on this one. I am hoping (fingers crossed) that we may have an offer on the house this week anyway, so this shouldn't be an issue hopefully.

Despairofhands

Richard_S

Hi despairofhands,

Thanks for that, it seem to be a definitive answer to the question; I'm sure that'll reassure a lot of people who are concerned about the implications of selling property during bankruptcy. I tried to get hold of our O.R last week but the person who could answer the question wasn't available and the others didn't know for certain exactly what the answer was.

Regards

Richard

mightymouse

Hi

I will read the thread in more detail but just wanted to put on this link as I have found it useful re home.

http://www.insolvency.gov.uk/pdfs/guidanceleafletspdf/home.pdf

mightymouse

Hi

The lender will require a court order if you do not sell first (say 2/3 months to eviction date) I would be inclined to build up some capital ready for moving.

you might use a P.O box for correspondence to save it going to your brothers address.