Protecting family home from being sold if bankrupted

One_Five_Four

Hello Folks,

My 57 year old brother-in-law accidentally burned out the roof of a bungalow he was working on back in 2011. He does property maintenance for a living and was self employed at the time. He is now nearly 59.

His insurers refused to pay out as he hadn't complied with all the conditions for the use of naked flames in his schedule, and the Financial Ombudsman upheld their decision, leaving him with a bill for £139,000 owing to the householder's insurance company.

Fuller details are here if you would like them:

https://forums.moneysavingexpert.com/discussion/3947619

Having spent around £25,000 of his £35,700 life savings on solicitors to try to fight the case, when the bill arrived back in March this year, all he could do was offer the £10,700 he has left.

After five months, the householder's insurers have just come back with full details of his house (valued by them at 'approximately' £197970) and mortgage, suggesting he tries to raise more money using the house as security and making them 'an increased offer'. Clearly they have done some in-depth investigation about his finances.

The house is jointly owned with his wife, and there is still a mortgage on it of £25,000 I believe.

We are unsure if he will be able to borrow much money this way as his income is minimal and he is not particularly well, the stress of the incident having affected him badly. His business was affected by both the incident and the recession, so he apparently only earns around £15,000 a year.

Please can anyone advise me about any steps he can take to ensure he doesn't lose the family home should he be declared bankrupt as a result of this.

I'm sure you'll need more details, so please ask and I'll try to respond as quickly as I can.

Many thanks for any help.

rizla_king

Don't think there is any "legal" way he can?

RuthnJasper

I am sorry for what happened - but if he was negligent I'm afraid he may have to take the hit. I'd imagine that the people whose roof was burned away are reasonable people, but they must have been terribly distressed and inconvenienced by what happened.

Can he and/or his wife take on extra work and/or sell anything other than their house in order to pay the debt? If so, maybe they could approach the other party with an offer to pay in instalments?

Hope all turns out well - for both parties. xx

One_Five_Four

Thanks folks.

He's already a 'workaholic' but to be blunt, he's almost totally worn out and his wife is similarly shattered. That is a huge sum of money to have to raise when you're both almost old enough to retire, and times are still tough in the building trade.

The owners of the house are elderly and in order to avoid them worrying, he hasn't told them his insurance wouldn't pay so they don't know what's happened. They think it's all done and dusted. He'd worked for them for many years and he classes them as friends as well as customers.

AdrianC

One_Five_Four wrote: »

Please can anyone advise me about any steps he can take to ensure he doesn't lose the family home should he be declared bankrupt as a result of this.

So... he owes £139,000. He has £10,700 in other assets, and ~£175,000 equity in the house.

Why would bankruptcy be a risk? Assuming the house value's roughly right, and ignoring the costs of selling, he's going to have ~£45k left.

But, yes, the house is going to have to be sold - unless there's some other way he can find ~£130k.

As far as the other householder's concerned, it sounds from what you say as if their insurer's paid up, and is now chasing your B-i-L to square them up for that payout, so his insurer isn't their problem.

jacques_chirac

He is unlikely to get a new mortgage to release that amount of equity at his age (assuming a low income), but there are some lifetime mortgages that may be suitable for them. There was a helpful post on the subject yesterday, I'll find it for you.

jacques_chirac

https://forums.moneysavingexpert.com/discussion/4784648

Here you go, post number 8. Best to take a copy of it now as the thread is by a troll and may be deleted soon.

debt_doctor

Hi,

You mentioned earlier that this house is jointly owned. Therefore any bankruptcy could only result in half of the equity being taken and the surplus funds being returned to the other owner.

I'm afraid that unless you can raise funds nothing would prevent the loss of the home but at least half the equity would return to the co owner.

If serious action looked likely then a voluntary charge may be a good offer as this will still only be up to half the equity but could be realised (by agreement) when both owners are deceased.

It would need to be pointed out (and if my client this would be my ace) that a charge would be up to the full 50% equity at any time where bankruptcy would be 50% minus IP fees - probably £40 - 50 000 - so the best deal medium / long term is the charge.

DD

One_Five_Four

Thanks to all the respondents who've tried to help. There's quite a lot for me to take in there, so I'll have another look tomorrow.

Thanks again.

debt_doctor

Yes, have a think, but arranging a voluntary charge will ( by negotiation - otherwise why would you agree) prevent the house sale until the owners have passed on.

DD

John1993_2

debt_doctor wrote: »

Yes, have a think, but arranging a voluntary charge will ( by negotiation - otherwise why would you agree) prevent the house sale until the owners have passed on.

DD

Also a. Possible jail sentence for fraud, but let's not let that sort of thing get in the way of him cheating someone out of compensation for his negligence...