Big Mortgage Shortfall - Is Bankruptcy My Only Option?

VelvetBrown

I'd appreciate some advice before I make a decision over whether to file for bankruptcy or not.

Some bad business decisions back in 2008 saw my marital home remortgaged for way more than it was worth and the £200,000 put into my ex-husband's business. This was on top of money he borrowed without my knowledge from friends, family and acquaintances. I wasn't happy about the remortgage but was persuaded to sign the forms as his business partner had remortgaged his house for the same sum.

The business failed, the mortgage wasn't paid and the house was eventually repossessed about a year ago. I moved out in early 2012 and wasn't aware of the repossession until after it had happened.

The house was sold earlier this year leaving a shortfall of almost £250,000.

I had received no correspondence from the bank regarding the mortgage arrears, the repossession or the shortfall, but during my divorce I took my solicitor's advice and wrote to the bank. I didn't want to be forever looking over my shoulder or waiting for a letter from them.

My ex-husband was declared bankrupt in 2012 and as I understand it, I am liable for the whole of the shortfall amount.

I have no assets, apart from my car which is worth approximately £3,500. I have a £1000 contingency fund, £700 of which will be used to pay for the bankruptcy if I decide to go ahead with it. I work full time earning less than £20,000, live in rented accommodation and have just lost my working and child tax credits as my youngest has just left to go to University.

I have done a rough budget and assuming my ex continues to pay the amount he is now, which is only by agreement not by the court, I have around £60 spare every month.

So my question is, is bankruptcy my only option? I phoned National Debtline who were really helpful and they seemed to think it was.

By the way I have no other debts at all, no credit cards, loans or even an overdraft.

Thank you in advance.

silvercar

The lender should allow you time to get back on your feet without trying to make you bankrupt. With no other debts I can see no reason to go bankrupt. Eventually they will try to agree a payment schedule with you. You should be pleasantly surprised by how little they are prepared to settle for. Only agree what you can afford and remember they have nothing to gain by making you bankrupt.

Cobalt77

Then again, you have an outstanding shortfall of £250,000 (excluding any interest / charges they may be adding). Given your income, it is highly unlikely you will ever pay this back in your lifetime.

Furthermore, consider that any substantial monies you win or inherit will end up going straight to the bank. If (or when) you get involved in your next relationship, you will be bringing a £250K debt with you - which can be a major strain in itself.

If you go BR, you will be under a repayment plan for a maximum of 3 years (you may not even have a repayment plan at all, depending on your outgoings), and the outstanding £250K is written off totally.

As you have no assets, it seems like a no-brainer to me - unless you wish to spend the rest of your life making repayments to a bank for something you are gaining no benefit from.

National_Debtline

Hi VelvetBrown


I hope you don't mind me throwing in my tuppence worth; I don't know which of my colleagues you spoke to here at NDL but based on what you say above, I would agree with their opinion that bankruptcy is the most logical step.


This is a very substantial debt by any standards, and even though there is every chance that you could negotiate to repay it at a very modest rate, the mere fact that it will linger (almost) indefinitely is reason enough to consider drawing a line under it completely and starting afresh.


Dennis
@natdebtline

VelvetBrown

Many thanks for taking the time to respond everyone.

I understand what you say silvercar but I'd like to put this all behind me and move on which I can't do if I'm repaying this huge debt forever.

Looks like I'll have to bite the bullet and make an appointment with the court then complete the forms.

In preparation (taking advice from here) I have already opened a Barclays basic account and I plan on transferring my payments over as I'm assuming that Santander will close my account.

Thanks again for your advice, what did we do before forums? :cool:

DorisTrousers

Might be an idea to get a true valuation on the car, for that value it could well be that the Official Receiver decides that he wants to take an interest in it.

On the plus side though, most people do tend to over estimate the value of vehicles.

VelvetBrown

Thanks DorisTrousers, I did an online valuation a couple of weeks ago which put my car at £4,000 so I'm assuming I'll get less if I do come to sell it. I really hope I don't have to get rid of it as its been a great car and I need it to get to work.

The court date is booked, I did try my luck and offered the solicitors acting for the bank the whole of my savings (£1,000) as a full and final settlement but I'm not expecting a yes.

fermi

Start putting together a case for how the car is essential rather than just convenient. If there is that value in the car that is realisable for the OR from selling it, then it's unlikely they will let you keep it, but may allow something cheaper.

tigerfeet2006

As Fermi says it is very unlikely you will get to keep a vehicle of such value. Why not sell it and get a car that is worth around £1k-1.5K which is the value that is normally allowed. Or do you have any one who can buy the OR's interest in the car?

If you do sell and buy a new car then you could always use the rest of the money for your BR fees.

Don't sell it for less than it is worth though and keep a paper trail of where the money went.

What are your reasons for needing a car?

VelvetBrown

Thanks for your replies, I need the car to get to work, and occasionally I use it for work related trips. My commute is about 25 minutes and not on a bus route.

Just filling in the bankruptcy forms now so I'll let you know how it goes in court.

skintandfat

You could do nothing and wait for them to take you to court to make you bankrupt.
If you don't pay the debt for 6 years then it is statute barred- in other words the same length of time a BR is on file; with the benefit of not having a BR on file


If I were in your position I would be writing to the creditor stating you cant afford to pay and ask them nicely if they could make you BR


Best case scenario- they leave you alone as they know that they will be throwing good money after bad.


OR;
they make you BR and you save £700,


Worst case
You make yourself BR and draw a line


You may not realise you are in a really strong position, the only fly in the ointment may be a rich uncle passing on and leaving you a large sum post BR and before discharge.