I have no idea what to do….

Help-Me_3

I feel like i am drowning and just don't know what to do. I know that others' are in much worse situations than me, but i am where i am...

I bought a property at the height of the boom. That property is still not worth what i paid for it and i am barely managing the “interest only” payments. I took terrible advice and never should have done this. I know this now. The problem now, is that the property management company are chasing the leaseholders for maintenance fees. Fees that seem very unreasonable.

Over the summer they asked for £120k (£4.5k of which i was liable for) for some building works and external decorations. I paid this in full whereas most of the leaseholders added these sums to their mortgages or are paying in installments. When this work began, they uncovered more problems with the structure as we are at risk of ingress of water and further deterioration to the structure and fabric of the building. The professional opinion of the project manager is that this work is urgent and the property management company have made an application to the First Tier Tribunal Property Chamber to request that the Tribunal expedite the hearing of their application to proceed without further consultation from the lessees and outlining why it is necessary for this work to be done in one go (instead of in affordable chunks).

The bill now stands at almost half a million pounds. For which i will be responsible for my percentage (approximately £25k). I do not have that kind of money and if this gets added to my mortgage, i am worried about the repayments increasing, how I will cope when interest rates eventually do go up and also what the property management company will ask us to fund next...

The freeholder (who incidentally comes under the same umbrella as the property management company) is not contributing a single penny to any of this work and apparently none of this work is covered by the building insurance that we have been paying for...

In summary:
I am considering going bankrupt and losing the flat and starting all over again. I do not fully understand if this option is even available to me? I have no other debts (just this mortgage which has been a chain around my neck for 7 years and the payments associated with this flat). I am employed full time but am holding on by a thread. I suffer with anxiety and depression and have no doubt that this purchase has cost me greatly (in health and money) over the years. If I do go bankrupt, can anyone chase me in future to get their money back? I have heard of people racking up huge debts on credit cards and store cards just prior to going bankrupt and that is absolutely NOT what I am interested in doing... I simply want to get rid of this property/mortgage and be left to start saving again in a sensible and honest way and hopefully get back on the property ladder in a few years’ time.

Again I apologise if my problems do not seem serious to other forum members. They are serious to me and i would appreciate any helpful advice to guide me through this difficult phase of my life.

Help-Me

Help-Me_3

PS: i have just noticed and downloaded the MSE Guide to Mental health and Debt 2013

Help-Me

Frugalsod

Your best bet would be to see an insolvency specialist. Though what about the building survey that would have been done when you bought? The surveyor or his insurer could be liable under professional cover. If you go bankrupt you will not be able to be jump back on the property ladder for more than a few years. It will stick on your credit file for a while.

debt_doctor

Hi,
You do need to seek your own personal advice from a debt charity, but these are my thoughts;


The £25k is an unsecured debt, so therefore a bankruptcy debt. You could petition BR on these costs when they are demanded / become payable.


If you (following your advice received) are looking to get out of your property, then the no. 1 most important thing is for you to get re housed.
This will probably need a bond and deposit, - you could stop paying the mortgage and use this money to put by for the costs of obtaining a new home, whilst still living in your current home.


Once re housed, save for the BR costs to rid yourself of the £25k debt. Once the possession of the lease takes place, any amount owing will fall in to your BR - whenever that happens to be.


Be aware of BR consequences, - the likely hood of a mortgage in 'a few years' is fairly slim - 5 or 6 years then maybe. Also look closely at IPAs in BR, might cost you for 3 years - or not, it depends on your financial situation when you go BR.


DD

silvercar

Another option would be to walk away from the flat and find yourself a rental. Stop paying the mortgage to give yourself a breather and raise the funds to move.

At some point the lender will repossess, either when you hand the keys back or at a later point when the arrears mount up. The lender may or may not pay the service charges, if they don't then the flat will be sold with these encumbered on the new buyer, so reducing the price further.

Either way you will end up in a situation where you are living in a home you can afford. At some point the lender will chase you to come up with a savings plan to pay off this debt. Lenders know that you will have no money immediately otherwise you wouldn't have fallen behind on your mortgage etc) and generally give you some time to get yourself together. At this point you have options:
a) go bankrupt and the debt falls into your bankruptcy
b) come to an agreed repayment schedule with the lender (effectively an unsecured loan)
c) offer the lender a small percentage of the original debt as a lump sum in full and final settlement of the debt.

Obviously (b) and (c) come without the bankruptcy. You have to think on how your life would be effected by bankruptcy. Do you work in an area where being a bankrupt could restrict your career? Do you earn enough that bankruptcy would mean an IPA for 3 years?

dancingfairy

Definitely get in touch with one of the debt charities such as National Debtline, StepChange or your local CAB and have a chat through the options.
In terms of the property - can you rent it out and rent somewhere cheaper? What do the other property owners think of the works/problems?
I'm not sure where you can get information relating to the building works -Shelter has an excellent website so there may be information on it on there.
If you have legal cover on your house then you could see if they would help you and see whether there is a case to be made against you solicitor at the time of purchase?
If you go bankrupt pretty much all your debt will be wiped out. There are one or 2 exceptions (student loans I think). Your biggest problem is going to be finding somewhere to rent and finding the fees for bankruptcy.
Do you have any other assets at all such as a car?
Do you work in a profession where bankruptcy is likely to cause you a problem - law, accounting, that sort of thing mainly?
One thing you may face is that if you go bankrupt then when your house is repossessed the mortgage lender may try and get you to sign some documents. You can end up signing for any shortfall on the house which if it is after you have gone bankrupt counts as a new debt (and therefore not covered in bankruptcy). It is therefore vitally important that if you do go bankrupt that you do not sign anything to do with the house shortfall. Before bankruptcy is fine (if you must) but do not sign anything after -there is no need.
Best of Luck
df

longtermplanner

Help-Me wrote: »

That property is still not worth what i paid for it

But does it have any equity in it?

(I know this is a long shot as the pending charges will make it very hard to sell a flat at a good price, but it's worth asking the question to make sure.)

For which i will be responsible for my percentage (approximately £25k). I do not have that kind of money and if this gets added to my mortgage

actually your position may be a bit worse than this, because the bill can't just 'be added to your mortgage' unless your lender agrees - and if there is little or no equity then the lender will not agree.

I do not fully understand if this option is even available to me?

yes it is - the judge will not be able to turn round as say you shouldn't go bankrupt. You have a right to go bankrupt if you cannot settle your debts in full. nb this doesn't mean that it is sensible though.

If I do go bankrupt, can anyone chase me in future to get their money back?

no - the management fee debt and any shortfall on the mortgage when the flat is sold by the lender will both be wiped out by bankruptcy

I simply want to get rid of this property/mortgage and be left to start saving again in a sensible and honest way and hopefully get back on the property ladder in a few years’ time.

It will have to be quite a few years. For the first 3 years you may need to make monthly payments to the Official Receiver and you are unlikely to be able to save anything. Bankruptcy takes 6 years to drop off your credit file and even after that you will have to tell a lender that you have been bankrupt in the past, even 10+ years later. Realistically you will have to save up a larger than usual deposit to compensate for this - and also you will need to be able to afford a repayment mortgage, as you cant get IO mortgages any more.

I don't know if bankruptcy is a sensible move for you. If you have mental health issues, then it can be very difficult to cope with debt problems, but that means you need good advice. I agree with the suggestions to talk to StepChange or your local Citizens Advice Bureau.

Do you have a spare room? Have you considered if you could get a lodger? That would be tax free money. What would it cost to rent somewhere suitable and does that compare to what you are paying on the mortgage?