Help Needed ref mortgage!!!

LoopyLou2_3

Hi All

I've spent the last few days on here reading through the posts and I'd like to say its helped me enormously

I declared myself BR two weeks ago. A little bit of background info for you (I’ve learnt on this site the more info you give the easier it is for you to help!)…. I left my ex fiancée in February 2006. When I left he told me he was going to buy me out of our flat as I had moved back home 100 miles away from where we lived together. Our mortgage was 125%: £102,000 with and unsecured loan added on of £30,000 (used to pay off his university debts – I saw none of the money) in joint names. Six months later I got a letter from his Trustee telling me he'd gone BR. His Trustees intended to take half the equity in the flat if it was sold so I would have only been left with a small sum, nowhere near enough to pay off the £30,000 loan.

I've made myself ill with worry and finally decided after a lot of soul searching BR was my only option as I'm 24 I don’t earn enough to cover the mortgage and the loan along with my personal debts (amounting to £8,000 they were manageable).

I have my interview with the OR next week but I’m confused with where I stand with the mortgage, obviously I don’t want the flat, neither does my ex. Will the flat just be repossessed as we‘ve both gone BR? Am I still liable for the mortgage payments even though I’m BR? I’ve been through all the paperwork and advice leaflets a thousand times but I’m confused and scared that I could still have to pay the mortgage, can anyone help? Sorry if this is long.

Conor_3

Mortgages aren't included in bankruptcy so I'm afraid you've still got to pay it.

The flat won't be repossessed just because you've gone BR unless there's equity in it. The mortgage company certainly won't repossess it just because you're BR until you've got to the point with not paying that you would have got to if you'd not been BR - if you see what I mean.

If the flat is sold, either by the OR or mortgage company and doesn't meet the outstanding mortgage, you will still both be liable for any shortfall.

Not sure about this £30k loan. Was it secured or was it a joint unsecured one? Trying to work out why you're liable for it.

What about renting out the flat?

LoopyLou2_3

Thanks Connor

Basically there is around 15K equity in the flat. I paid off one lot off arreas 4 months ago that my ex left me with but have run out of money. My ex's Trustees have advised that because I cannot buy his interest in the flat it has to be sold. However Northern Rock are still heavily chasing both my ex and I for mortgage payments, my ex has refused to pay anything on the grounds that his Trustees won't let him pay anything. Northern Rock were willing to let me voluentarily surrender the flat by my ex's Trustees wouldn't let me do this.

Renting it out isn't an option as the rent wouldn't cover the mortgage and I'm paying rent where I live now, 100 miles away from the flat.

The loan was unsecured in joint names and his Trustees have told me I'm now liable for this

I'm so confused!

rog2

Hi LoupyLou - I have pm'd you. Not much to add other than to say that, in my opinion, your ex's trustee must now fight it out with your OR, or trustee if one is appointed.
I would make this a priority question for your OR meeting, but I'm sure your mind will be put at rest then.
Good luck.

rog2

LoopyLou2 wrote: »

The loan was unsecured in joint names and his Trustees have told me I'm now liable for this

This may have been true PRIOR to your bankruptcy, but is no longer correct.

Conor_3

Seconded. The only thing you're BOTH liable for is the shortfall in the joint mortgage.

fermi

Conor wrote: »

Seconded. The only thing you're BOTH liable for is the shortfall in the joint mortgage.

Fortunately, this would become an unsecured debt and therefore included in the bankruptcy of both parties. This question has come up before, and the individual OR's have confirmed this to be the case.

I can't post details of individual emails and letters from the OR's involved without permission but the position is easily confirmed by a very quick and rough search. For example:

http://www.tltsolicitors.com/legal-update/Banking-and-Lender-Services-Update/P4770.asp

Shortfall on sale

In the early 1990s it was a regular occurrence for properties to be sold for sums which were insufficient to discharge the debt. Over subsequent years, lenders have pursued borrowers for those shortfalls. Case law and the Council of Mortgage Lenders’ Statement of Practice has laid down the length of time a lender has to chase any debt.

A shortfall debt is obviously unsecured. When a borrower becomes bankrupt and after the mortgaged property has been sold, the lender becomes one of the borrower’s unsecured creditors. This is the case whether or not the borrower was made bankrupt before the sale of the property or after.

http://www.purnells.co.uk/phouse-transfer.htm

NEGATIVE EQUITY

If there is "negative equity" in the property you may wish to do one of two things.
You may wish to hand the keys back. If so, the full amount of any loss the mortgage company makes will be written off in the bankruptcy or

If practical, you may wish to retain the property. (Be careful, if your spouse is also named on the mortgage, that person will become responsible for the full amount owing.)

To retain the property and to protect it from future attack by creditors you can either:
Transfer the "legal interest" to your spouse, or other person (by using a solicitor)

If the mortgage company will not allow you to transfer the "legal interest" then it is possible to achieve a similar result by transferring the "equitable interest" (by using a solicitor).

You will remain responsible for repaying the full amount on all the mortgages if you retain the property.

Unfortunatley this issue is poorly explained on the Insolvency Service website, which results in much confusion even for professionals in this area.

rog2

fermi wrote: »

Fortunately, this would become an unsecured debt and therefore included in the bankruptcy of both parties. This question has come up before, and the individual OR's have confirmed this to be the case.

I can't post details of individual emails and letters from the OR's involved without permission but the position is easily confirmed by a quick search. For example:

http://www.tltsolicitors.com/legal-update/Banking-and-Lender-Services-Update/P4770.asp

http://www.purnells.co.uk/phouse-transfer.htm



Unfortunatley this issue is poorly explained on the Insolvency Service website, which results in much confusion even for professionals in this area.

Thanks fermi - that's EXCELLENT news for LoupyLou. :beer:

LoopyLou2_3

Thanks fermi for taking the time to post that info. Its put my mind at rest after much confusion and worry.

Richard_S

Conor wrote: »

Seconded. The only thing you're BOTH liable for is the shortfall in the joint mortgage.

Hi LoopyLou,

Rog2 and fermi have both answered your query with accurate information but for Conor's benefit I've quoted the relevant regulations relating to your situation. If you stop paying the mortgage then all that means is that the mortgage provider is owed more money from your estate; not a concern of yours, unless you win the lottery.

Best regards

Richard

In summary, what the regulations mean is that if you sell a property after being declared bankrupt then any shortfall is included in your bankruptcy. There was some confusion as to whether you had to declare bankruptcy after the shortfall was realsied for it to be included.

380. Introductory
The next five sections have effect for the interpretation of the provisions of this Act which are comprised in this Group pf Parts; and where a definition is provided for a particular expression, it applies except so far as the context otherwise requires.
381. "Bankrupt" and associated terminology
(1) "Bankrupt" means an individual who has been adjudged bankrupt and, in relation to a bankruptcy order, it means the individual adjudged by that order.
(2) "Bankruptcy order" means an order adjudging an individual bankrupt.
(3) "Bankruptcy petition" means a petition to the court for a bankruptcy order.
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 commence- ment of the bankruptcy,
(c) any amount specified in pursuance of section 39(3)(c) of the Powers of Criminal Courts Act 1973 in any criminal bankruptcy order made against him before the commencement of the bankruptcy, and
(d) any interest provable as mentioned in section 322(2) in Chapter IV of Part IX.
(2) In determining for the purpose of any provision in this Group of Parts whether any liability in tort is a bankruptcy debt, the bankrupt is deemed to because subject to that liability by reason of an obligation incurred at the time when the cause of action accrued.
(3) For the purposes of references in this Group of Parts to a debt or liability, it is immaterial whether the debt or liability is present or future , whether it is certain or contingent or whether the amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in this Group of Parts to owing a debt are to be read accordingly.
(4) In this Group of Parts, except in so far as the context otherwise requires, "liability" means (subject to subsection (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment and any liability arising out of an obligation to make restitution.
383. "Creditor" "security", etc
(1) "Creditor" -
(a) in relation to a bankrupt, means a person to whom any of the bankruptcy debts is owed (being, in the case of an amount falling within paragraph of the definition in section 382(1) of "bankruptcy debt", the person in respect of whom that amount is specified in the criminal bankruptcy order in question), and
(b) in relation to an individual to whom a bankruptcy petition relates, means a person who would be a creditor in the bankruptcy if a bankruptcy order were made on that petition.
(2) Subject to the next subsections and any provision of the rules requiring a creditor to give up his security for the purposes of proving a debt, a debt is secured for the purposes of this Group of Parts to the extent that the person to whom the debt is owed holds any security for the debt (whether a mortgage, charge, lien or other security) over any property of the person by whom the debt is owed.
(3) Where a statement such as is mentioned in section 269(1)(a) in Chapter I of Part IX has been made by a secured creditor for the purposes of any bankruptcy petition and a bankruptcy order is subsequently made on that petition, the creditor is deemed for the purposes of the Parts in this Group to have given up the security specified in the statement.
(4) In subsection (2) the reference to a security does not include a lien on books, papers or other records, except to the extent that they consist of documents which give a title to property and are held as such.
384. "Prescribes" and "the rules"
(1) Subject to the next subsection "prescribed" means prescribed by the rules; and "the rules" means rules made under section 412 in Part XV.
(2) References in this Group of parts to the amount prescribed for the purposes of any of the following provisions -
section 273;
section 346(3);
section 354(1) and (2);
section 358;
section 360(1);
section 361 (2); and
section 364(2)(d),
and references in those provisions to the prescribed amount are to be read in accordance with section 418 in Part XV and orders made under that section.
385. Miscellaneous definitions
(1) The following definitions have effect -
"the court", in relation to any matter, means the court to which, in accordance with section 373 in Part X and the rules, proceedings with respect to that matter are allocated or transferred;
"creditors petition" means a bankruptcy petition under section 264 (1)(a);
"criminal bankruptcy order" means an order under section 39(1) of the Powers of Criminal Courts Act 1973;
"debt" is to be constructed in accordance with section 382(3);
"the debtor" -
(a) in relation to a proposal for the purposes of Part VIII, means the individual making or intending to make that proposal, and
(b) in relation to a bankruptcy petition, means the individual to whom the petition relates;
"debtor's petition" means a bankruptcy petition presented by the debtor himself under section 264(1)(b);
"dwelling house" includes any building or part of a building which is occupied as a dwelling and any yard, garden, garage or outhouse belonging to the dwelling house and occupied with it;
"estate", in relation to a bankrupt is to be constructed in accordance with section 283 in Chapter II of Part IX;
"family", in relation to a bankrupt, means the persons (if any) who are living with him and are dependent on him;
"secured" and related expressions are to be constructed in accordance with section 383; and
"the trustee", in relation to a bankruptcy and the bankrupt, means the trustee of the bankrupt's estate.
(2) References in this Group of Parts to a person's affairs include his business, if any.

Conor_3

Thanks Richard. Is this something that has changed in the past few years?