advice on when to go br

zeldab

Hi everyone, hope someone can help please. We currently have 33k on a DMP with Step Change,we have two properties one a empty flat, interest only mortgage of 91k and is only worth about 75k at the moment and our house, 105k interest only mortgage and is only worth about 95k currently. We have three children all under 11. We are really struggling to pay both mortgages and the DMP and live. We are thinking of a voluntary repo on the empty flat and then going BR, hopefully staying in the family house. Would it be wise to let the repo on the flat run its course then go BR or should we just go BR now and add the flat shortfall into the BR later?Also, will we definitely be able to stay in our house or will OR make us sell it, we have had both properties on the market for over a year with no offers on either.We are also struggling to get the BR fee, so would be able to use the mortgage payment for the flat to save up. Any advice greatly appreciated.

National_Debtline

Hello there.

You can go bankruptcy whenever you wish. If you are resigned to giving up the flat there is little point in paying towards the mortgage. You can instead use that money to save up for the bankruptcy fee. If the flat is repossessed after your bankruptcy date your shortfall will still be automatically included - just ensure you do not sign a 'deed of acknowledgement' as this could make you liable fort he shortfall once more.

It is likely you'll be able to keep your family home given the fact that you are in negative equity. The OR will review the property's value in a little over two years time. Whilst I cannot preduct what might happen to house prices over the next few years I think there is a good chance that the house's value isn't going to significantly shoot up.

There is some good information about the home and bankruptcy here:
http://bis.gov.uk/assets/insolvency/docs/publication-word/what-will-happen-to-my-home.doc

Best wishes,

David @ NDL.

zeldab

Thanks for reply David, we are still dithering between a IVA or BR.Are they as restrictive as each other in regards of spare money. As we will not have a second mortgage or a second council tax to pay we are assuming we will have to pay quite a lot every month to the OR. BR sounds a better choice because of the shorter timescale involved, I,m 46 and do not relish the thought of still being in debt when i am 52.

National_Debtline

Hi zelda

Dennis answering this time.

Let's assume for a moment that you no longer have the empty flat to maintain - how much does it cost you to run the family home on its own, and how much disposable income would this leave you with? (I'd normally suggest at this stage that you put a Statement of Affairs up, but for now feel free to give some rough estimates.)

Hard to compare BR and IVA in terms of "restrictiveness" on spare money. What I can say is that in both cases, the OR/IP will be looking to get the best possible return - in BR, it's a case of "what the OR says, goes". In an IVA, you've maybe got a bit more scope to haggle as the IP is not going to earn any fees unless they come up with an IVA proposal that you are willing to commit to. The IVA will typically last 5 years, possibly 6 (you will often be asked for an extra year of payments if unable to release any equity). Bankruptcy itself normally lasts 1 year before you are discharged, but any surplus income paid through an Income Payment Agreement can last up to 3 years.

Hope that helps

Regards

Dennis @NDL

National_Debtline

I should also point out that with an IVA, you might need to wait a little longer to establish the precise size of any "shortfall" owed to the mortgage lender for the empty flat. In BR, no such waiting is required - the whole shortfall will be included, however large and however long it takes for its exact size to be determined.

Regards

Dennis @NDL

Depth_Charge

National_Debtline wrote: »

Hi zelda

Dennis answering this time.

Let's assume for a moment that you no longer have the empty flat to maintain - how much does it cost you to run the family home on its own, and how much disposable income would this leave you with? (I'd normally suggest at this stage that you put a Statement of Affairs up, but for now feel free to give some rough estimates.)

Hard to compare BR and IVA in terms of "restrictiveness" on spare money. What I can say is that in both cases, the OR/IP will be looking to get the best possible return - in BR, it's a case of "what the OR says, goes". In an IVA, you've maybe got a bit more scope to haggle as the IP is not going to earn any fees unless they come up with an IVA proposal that you are willing to commit to. The IVA will typically last 5 years, possibly 6 (you will often be asked for an extra year of payments if unable to release any equity). Bankruptcy itself normally lasts 1 year before you are discharged, but any surplus income paid through an Income Payment Agreement can last up to 3 years.

Hope that helps

Regards

Dennis @NDL

Hi Dennis

Interesting quote on the O/R regarding what they say goes

I am not sure that I fully agree with this quote and was wondering if you can expand on this comment.

The reason I am asking is that I know of many cases (including ones that I have been directly involved in) where the O/R has been successfully challenged at office and court level.

Regards

DC

fatbelly

National_Debtline wrote: »

It is likely you'll be able to keep your family home given the fact that you are in negative equity. The OR will review the property's value in a little over two years time. Whilst I cannot preduct what might happen to house prices over the next few years I think there is a good chance that the house's value isn't going to significantly shoot up.

Could you also let us know by how much you think house prices will rise over the next 27 months?

The OP has said that there is a 105k interest only mortgage on his and it's worth 95k today.

alastairq

Re-BR? The IPA is, after all, an agreement......not an imposition.

Plus..even if a surplus of income is identified, and an IPA agreed to, the amount paid can be varied throughout the 3-year term should the BR's circumstances change....simply by informing the OR in line with the BR rules.

With an IVA, I suspect things are not quite as simple?

Finally, should circumstances change for the worst, in an iVA...and the IVA fails, BR is [usually?] the final solution anyway.

National_Debtline

fatbelly wrote: »

Could you also let us know by how much you think house prices will rise over the next 27 months?

Hello there.

I don't think anyone can genuinely predict what might happen going forward - and in addition, also it's important to consider regional variations. When making their decision, the OP may wish to track the house prices in their area. One assumption that I made was that the OP isn't living in the South East.

Best wishes,

David.

zeldab

Thanks for all of the replies, we are in rural north east england, house prices seem to keep dropping with no sign of a recovery at the moment. We have just emptied everything out of the flat in preparation to handing back the keys. Does anybody know how long the repo will take and is the flat still ours until the official repo happens, also will council tax still have to be paid? Thanks again everyone.

luvchocolate

Yes you still liable for council tax and building insurance until it is officially repossessed, times vary depending on banks mine took 10 months