Bankruptcy or iva?!

Rugby13

First ever post on here but desperately need some advice!!

I got my first mortgage at the age of 20, a few years later due to financial difficulty I surrendered and gave the keys back to the mortgage company and stupidly burried my head into the sand. They chase me for the outstanding 35k for a few years and now 5 years on they seem to have given up? Since giving back the keys and hiding I've never been in any sort of debt since and and now I'm at the stage in my life where I'm wanting to face the music. I've been saving for a mortgage again. But I know i need to clear my name before I can buy again. I'm 31 now with two young children and would like to get back on the ladder asap. Do I go bankrupt? Or is there another solution?? Any help would be truly grateful

sourcrates

Rugby13 wrote: »

First ever post on here but desperately need some advice!!

I got my first mortgage at the age of 20, a few years later due to financial difficulty I surrendered and gave the keys back to the mortgage company and stupidly burried my head into the sand. They chase me for the outstanding 35k for a few years and now 5 years on they seem to have given up?

Hi,

There has been some confusion in the past about mortgage shortfalls and the Limitation Act. However, the Court of Appeal has now decided that the following limitation periods apply to mortgage shortfall debts.

If you owe mortgage capital

Mortgage capital is the money you originally borrowed. For this part of a mortgage shortfall debt, the lender has 12 years to use court action to make you pay. This is under section 20 (1) of the Limitation Act.

If you owe interest

Mortgage interest is the interest you were charged to borrow the money. Your lender may also charge interest after your home is sold. For this part of a mortgage shortfall debt, the lender has six years to use court action to make you pay. This is under section 20 (5) of the Limitation Act.

Which do you owe ?

Rugby13

They went on to sell the property for 35k less then what I lent. So I owe the mortgage shortfall. If after six years they haven't taken any court action does that mean I'm clear to start afresh?

sourcrates

Rugby13 wrote: »

They went on to sell the property for 35k less then what I lent. So I owe the mortgage shortfall. If after six years they haven't taken any court action does that mean I'm clear to start afresh?

You need to answer the above question, is it capital you owe, or interest ?

I would assume the interest was repaid from the proceeds of the sale, so it may be capital you owe.

Your mortgage lender would of written to you detailing how the proceeds from the sale were distributed, do you still have the letter ?

Its a very important distinction.

This is a link to the National Debtline website, they have a factsheet on mortgage shortfalls, its quite long, but it contains a lot of stuff you need to be aware of, i suggest you read it through before doing anything else :

https://www.nationaldebtline.org/EW/factsheets/Pages/mortgage-shortfalls/mortgage-debt.aspx

National_Debtline

Hi Rugby13

Welcome to MSE. There are quite a few things to consider here, for example is the mortgage shortfall debt your only debt? How much have you saved for a deposit? Has the mortgage lender run out of time to pursue you?

With regards to that last question, probably not quite. If a debt is statute barred, it means the creditor has run out of time to obtain a CCJ to recover the debt. For this to apply to the capital part of your mortgage there must have been 12 years without a payment (by any liable parties) and without any written acknowledgement of the debt on your part. When the house is sold the interest is usually paid off first, leaving the lender to pursue you for the capital part.

You need to bear in mind that any money you have saved for a deposit on a property is going to be taken as an asset in bankruptcy. Your ability to get a mortgage is also going to be seriously affected by entering into bankruptcy or an IVA, at least for the next 6 years. Your next step is to seek advice on your options from one of the free debt advice charities.

Susie
@Natdebtline

GDB2222

sourcrates wrote: »

I would assume the capital was repaid from the proceeds of the sale, so it may just be interest you owe.

National_Debtline wrote: »

When the house is sold the interest is usually paid of first, leaving the lender to pursue you for the capital part.

There's an obvious difference of opinion there.

If there's a lot of capital outstanding and it will take at least 7 more years for the OP to be rid of that, would bankruptcy be a sensible option?

Particularly, as the 7 years is just the time during which the lender can get judgement against the OP. There's the chance that they will wait until nearly the end of that period, then get judgement. What happens then?

silvercar

This thread suggests that lenders have agreed not to chase shortfalls where there has been no contact for 6 years rather than 12.

http://forums.moneysavingexpert.com/showthread.php?t=1644477

Rugby13

I'm pretty sure it's capital I owe and not interest and yes the mortgage shortfall is my only debt. I'm kicking myself for leaving it so long, but I couldn't see a way out so burying my head in the sand seemed the best option at the time. Now I'm weighting up the possibility of bankruptcy I wish I done it years ago! So in short the mortgage company won't just disappear? And if an I.v.a has the same effect on my future mortgage as bankruptcy.. surely I'm better to go with bankruptcy? Start a fresh save for another six years and hope for the best at the end of it?

mwarby

Rugby13 wrote: »

I'm pretty sure it's capital I owe and not interest and yes the mortgage shortfall is my only debt. I'm kicking myself for leaving it so long, but I couldn't see a way out so burying my head in the sand seemed the best option at the time. Now I'm weighting up the possibility of bankruptcy I wish I done it years ago! So in short the mortgage company won't just disappear? And if an I.v.a has the same effect on my future mortgage as bankruptcy.. surely I'm better to go with bankruptcy? Start a fresh save for another six years and hope for the best at the end of it?

If the mortgage shortfall is statue barred you don't need either, as you in effect have no debt. I would be looking for debt/legal advice(preferably from someone who doesn't have a vested interest in selling you a debt solution) on this before thinking of IVA or bankruptcy.

Rugby13

How will I find this out? Is there some sort of register? And do you have any ideas on where to go for further advice regarding the statue barred? As most people seem to just want to get money out of me. And citizens advice wasn't much of a help previously. Thanks alot for all the advice from everyone so far

Johnsmith2016

Before you do anything you need to find out were you stand with this debt.

Professional legal advice.... don't take the word of some cowboys, the distinction here is too great for some ill informed person to send you down the incorrect route.