Bankruptcy Advice please???

LookingforAdvice99

Hi All,

This is my first post so please be gentle.

Bit of a dilemma to honest....here goes.

Mother and father law (both married for over 35 yrs) live in a property worth about 400-420k, with no mortgage.

Their only child is the daughter who I am married too and we both live in our own mortgaged house, with 2 very young children.

Her father (my father in law) recently got himself into some money troubles blowing all their savings (approx. 100k) on gambling machines so not on any form of personal assets.

He then took a loan from 2 or 3 high street banks and used the money to try and start an online business, which failed.

Banks continually sent reminders to pay bank what is owed (well at least the minimum each month) which he has nothing to pay back with - he has been taken to court and is declaring himself bankrupt.

Father in law is 65 yrs old and hasn't worked since he sold his shop to a relative 5 years ago in which he had also blown that money away too.

Both father and mother have no savings, mother works full time on minimum wage just to get by and pay the bills.

They own no other assets or possessions worth anything.

My question is as the father is declaring bankruptcy because ultimately he has no means of paying the loans which are spread between 15-20k across 3 bank accounts (well at least that is what I last understood)

- What could potentially happen in a situation like this?
- If declared bankrupt the money owned to the banks will be waivered? or
- Will the courts force the couple to sell the property to repay the banks loans?
- Should the father die, the debt will be the responsibility of the mother because the property is likely to be in her sole ownership?
- Father-in-law will not be able to get any credit in future and will have a CCJ against his name?
- When declared bankrupt the money is waivered and there is nothing else remaining apart a CCJ against the fathers name?

Mother does not want a divorce and is happy to live like it is. She doesn't give the father any money to feed his habit and on a piece of paper given to her daughter has written a note that she wishes any money and the her share of the property to go into her daughters name (the property is in joint mother/father tenancy)- should it be sold on the death of mother (by her father) or on agreement between daughter and father.

I probably don't know much about how bankruptcy works but ultimately we wish the parents house be automatically inherited by the daughter should both parents pass without the banks taking ownership due owning them money.

PS. father will not make a will, he wants to keep his name on the property deeds. Mothers deeds/share should she pass be inherited by daughter and not swallowed by her father.

Please help as much as possible

National_Debtline

Hello there.

Bankruptcy is unlikely to be the right option. For two reasons.

The first is that any assets owned by the bankrupt could be sold. This includes the house. It is possible for someone to buy his share of his 'beneficial interest' in the property, this could allow them to kep the property. The Insolvency Service has a useful guide to this, here is the link: http://bis.gov.uk/assets/insolvency/docs/publication-word/what-will-happen-to-my-home.doc

The second concern is that should he become bankrupt it would be very likely that he would me made subject to a bankruptcy restrictions undertaking (sometimes this may be subject to a court order). This means he could be held under the various sanctions that bankruptcy places on an individual for longer than the twelve months that bankruptcy typically lasts for.

Those held under such a restriction cannot:

• apply for credit of £500 or more without telling the lender about the order;
• continue to run a business in a different name from the one in which you were made bankrupt, without telling those you want to do business with the name under which you were made bankrupt;
• become an MP or local councillor;
• be a director of a limited company or form a new limited company without permission; or
• be an insolvency practitioner

Of course, depending on his circumstances and intentions these restrictions may not cause too much of an issue for him. My key concern is the property.
We have a very comprehensive guide to bankruptcy which can you find *here*.

He may wish to consider negotiating reduced, affordable payments to his creditors instead. In some cases these offers of payment could be as low as a pound a month. We've a great guide to dealing with debts in four simple steps, you can find it *here*.

Best wishes,

David @natdebtline

LookingforAdvice99

Hi David,

Thank you for the prompt and in explaining a bit more in laymen's terms.
I will shortly look at the links you've attached above however I am concerned mostly for mother-in-laws well being who has done absolutely nothing wrong her.

She has stuck by her husband and as you clearly pointed out is of risk in losing the roof over her head because of her irresponsible husband. I don't think he (or we) are too bothered what he is sanctioned for, I suppose he has to pay the price and those sanctions imposed against can only help and stop him making similar mistakes.

Another question I suppose which leads onto your first paragraph - someone could buy his share 'beneficial interest'. What does that mean, the banks could buy his share which I guess what you are saying would allow all of the money owned to the banks to be repaid?

Second question - I suppose he could negotiate as much as he can afford to pay back each month (from his pension if he has taken that out) but what happens if he passes and there is still a large chunk to pay back to the bank.

As you say bankruptcy is the last resort here but surely there is a way to protect the property from being sold, ceased, or owned by a beneficiary.

I think I should read the links to give me a better understand but thank you explaining. I'll be back.

Flm67

The banks won't buy the beneficial interest. It would have to be a family member or someone close that you trust. If the house is worth 400k then his beneficial interest would be £200k. The house could be put up for sale to release his share of the equity to pay his creditors. Bankruptcy in my opinion would not be a good idea in this case. Would they perhaps consider selling the house and downsizing thus releasing money to pay his creditors?

National_Debtline

Another option is that your father could offer the various creditors a 'voluntary charge'. This would secure the debt against the property - so that when it is sold at a later stage, the debts would be sold from the sale proceeds. This would, of course, potentially hinder their ability to pass the property via inheretance.

David.

TheGardener

I am not well enough informed about houses and BR to give advice about the house and mortgage and I don't want to sound like I'm offering advice not asked for but from your posts I would say whatever solution you come up with - and there will be a financial solution of some sort to deal with this - the biggest issue your F-in-L's gambling addiction and inability to cope with money. I think your family need support and advice about this as it seems he will carry on until there is nothing left of the house either. If the house were sold to pay creditors and your mum puts her 'share' out of his reach and they rent somewhere they can afford, it would give your F-in-L some window to get help without losing everything - most addicts seem to agree that its only when there is nothing left and they have hit the bottom - that they try and find help.

debtinfo

david is right, bankruptcy does not seem the right choice, they would most likely lose the property if a friend or family member cannot buy the interest and 200K is a lot to find. Also a sale by an Insolvency Practitioner would eat up way more of FIL's share of the property than a simple sale by both of them and a fair split of the proceeds.

LookingforAdvice99

TheGardener wrote: »

I am not well enough informed about houses and BR to give advice about the house and mortgage and I don't want to sound like I'm offering advice not asked for but from your posts I would say whatever solution you come up with - and there will be a financial solution of some sort to deal with this - the biggest issue your F-in-L's gambling addiction and inability to cope with money. I think your family need support and advice about this as it seems he will carry on until there is nothing left of the house either. If the house were sold to pay creditors and your mum puts her 'share' out of his reach and they rent somewhere they can afford, it would give your F-in-L some window to get help without losing everything - most addicts seem to agree that its only when there is nothing left and they have hit the bottom - that they try and find help.

Thanks the Gardner, I completely agree he needs help but that is a whole different ball game with him.

LookingforAdvice99

I like the suggestion of a 'voluntary charge' If the courts offered that then that would be a possible solution.

The problem is father in law is a proud man who rarely tells the truth to his own family, tells lots of fibs. Neither his wife or I know how the court proceedings are going or whether he knows himself what each of the options are.

It is a right mess, we have tried ourselves to help him 2 years ago by offering to pay what was owed to the banks but as we sat round a table at the family home to discuss all financial outgoings, loans, money owned to his own friends etc he simply made up lots of it.

Its just a shame, its his and his wife's house and they only have one child who now has 2 young boys with me. On both parties passing and with a will being drawn up their daughter could inherit the property as would our children in future.
Clearly this isn't something he has thought of and its all about him and his habit.

Before this he was a good father, husband and grandfather but feel his first love is money and gambling (trying to get rich at the machines).

This is a disease and completely understand it can happen to anyone but surely at 65 years old with his daughter married to a good man, 2 young boys, he has a roof over his head, a wife who continues to live with him (yet no support his actions), both healthy and living that doing what he does allows to run his life.

Can I ask, if me and my wife managed to get 20k together and pay the loans of ourselves on behalf of father in law, is that possible. Would that put a line through the any further proceedings. It would resolve this situation but the gambling problem with the father in law would still remain.

We did previously offer this to the father in law but being who is he, he would rather file for bankruptcy (I think he took business loans on the basis of the internet business which failed).
In exchange we said to transfer his share of the property to his daughters. He didn't want to do that, we would put a guarantee in place that on the passing of his wife he still will be able to live their but he said no.

We couldn't help more than that, doing it that way the roof would remain over both parents heads and loans would be paid off.

TheGardener

I think as long as there is an 'asset' in the shape of the house - it sounds like he will keep going until there is nothing left - just keep adding voluntary charges until there is no equity left. I would concentrate on getting his wife's 'share' out of the property and protecting it somehow - if that means selling up then that might be an option to consider.

blisteringblue

TheGardener wrote: »

I would concentrate on getting his wife's 'share' out of the property and protecting it somehow - if that means selling up then that might be an option to consider.

Exactly, as harsh as it sounds it is his house and he can pretty much do as he pleases. While I understand you are looking to protect a possible inheritance it's a tough one.

Is there a way to possibly release some equity and get him to sign the house over to his wife as a condition of doing this. I know equity release can be frowned upon but it may be a way out for you all?