Bankruptcy threat - please help!

edited 30 November -1 at 1:00AM in Bankruptcy & Living With It
10 replies 2.3K views
skillboyskillboy Forumite
106 Posts
edited 30 November -1 at 1:00AM in Bankruptcy & Living With It
I’ve got a flat with a mortgage on it, maybe 20% equity plus another buy to let but again that has a big mortgage on it, maybe 25% equity. Then I invested in an off plan 5yrs ago at the peak of the housing market which is due to complete next year and which I basically can’t afford to complete because I over extended myself.

Even if I sold my flat and my buy to let I still wouldn’t have enough of a deposit to get the mortgage I needed. I know that the value of this off plan has definitely fallen because it is in the luxury end of the market in flats and the bottom has fallen out of the market. Therefore I am stuck and basically up the creek without a paddle.

I was thinking if I could sell my flats before declare bankruptcy, but that doesn’t sound legit? If anyone else can think of a way out of this then I would be all ears. Basically greed and a poor prediction of the housing market has led me to the brink of bankruptcy!

Replies

  • edited 27 December 2018 at 9:17AM
    TheGardenerTheGardener Forumite
    3K Posts
    Part of the Furniture 1,000 Posts Name Dropper
    ✭✭✭✭
    edited 27 December 2018 at 9:17AM
    Selling the flats to pay your debts is ok - selling the flats and spending the money on, for example, a holiday isn't ok. The proceeds from the flats should be shared equally amongst your creditors if you plan to go BR - that way you would avoid being seen to give one creditor preference over another.

    Do you have other debts besides the new build?
  • edited 27 December 2018 at 2:47PM
    Pixie5740Pixie5740 Forumite
    14.1K Posts
    ✭✭✭✭✭
    edited 27 December 2018 at 2:47PM
    skillboy wrote: »
    I’ve got a flat with a mortgage on it, maybe 20% equity plus another buy to let but again that has a big mortgage on it, maybe 25% equity. Then I invested in an off plan 5yrs ago at the peak of the housing market which is due to complete next year and which I basically can’t afford to complete because I over extended myself.

    Even if I sold my flat and my buy to let I still wouldn’t have enough of a deposit to get the mortgage I needed. I know that the value of this off plan has definitely fallen because it is in the luxury end of the market in flats and the bottom has fallen out of the market. Therefore I am stuck and basically up the creek without a paddle.

    I was thinking if I could sell my flats before declare bankruptcy, but that doesn’t sound legit? If anyone else can think of a way out of this then I would be all ears. Basically greed and a poor prediction of the housing market has led me to the brink of bankruptcy!



    You can sell the flats before declaring bankruptcy, in fact if there's a good chance that they would be repossessed during bankruptcy if you didn't then when buying somewhere again in the future having to declare that you've previously been bankrupt looks better than saying you had properties repossessed. However, you shouldn't then blow the proceeds of the sales on drugs, hookers, expensive holidays, Hermes handbags (although those can be a very good investment), etc.

    What is your solicitor saying? Have you approached the developer? Do you have the option of selling this off plan property to someone else before it completes? I know of someone in Scotland who went as far as concluding the missives on an off plan new build, got made redundant and after appealing to the builder managed to get out of the sale. The builder knew the house would easily sell to someone else and there was no point dragging someone to court when they didn't have the money.
  • edited 28 December 2018 at 2:06PM
    FestiveJoyFestiveJoy Forumite
    229 Posts
    edited 28 December 2018 at 2:06PM
    skillboy wrote: »
    I’ve got a flat with a mortgage on it, maybe 20% equity plus another buy to let but again that has a big mortgage on it, maybe 25% equity. Then I invested in an off plan 5yrs ago at the peak of the housing market which is due to complete next year and which I basically can’t afford to complete because I over extended myself.

    Even if I sold my flat and my buy to let I still wouldn’t have enough of a deposit to get the mortgage I needed. I know that the value of this off plan has definitely fallen because it is in the luxury end of the market in flats and the bottom has fallen out of the market. Therefore I am stuck and basically up the creek without a paddle.

    I was thinking if I could sell my flats before declare bankruptcy, but that doesn’t sound legit? If anyone else can think of a way out of this then I would be all ears. Basically greed and a poor prediction of the housing market has led me to the brink of bankruptcy!

    Speak to your solicitor.

    Presumably, as you agreed this purchase 5 years ago. the property will be worth a lot more today than it was when you decided to buy it as an investment 5 years ago.

    five-year-trend.jpg
    I fail to understannd how you would have invested otherwise? :huh:

    I guess it would be too much for you to show us the valuation certificate you purchased 5 years ago for this property that would prove otherwise? :D

    Legally speaking, failing to complete on the purchase that you have already exchanged on would leave you in breach of contract.
    The vendor could pursue you for damages .. but they cannot make you buy.

    In reality, you'll probably lose your deposit that you have already paid, since that combined with price growth should mean the vendor can resell today (including all costs) and so easily cover any losses your failure to complete may incur.

    Advising your solicitor asap, and so alerting the seller to find a new buyer sooner rather than later should also help reduce losses for the seller.

    If you are lucky, and have a really good solicitor, you might find you even get some of the deposit back :beer:
    (but I doubt it)


    As regards to you considering yourself on the brink of bankruptcy, I suggest you go and seek some professional financial advice. Nothing in your post suggests to me you should even be considering bankruptcy.


    :xmastree::xmastree::xmastree::xmassign:
  • You need to clarify thextent of your liability to complete the new transaction. As others have said they may only keep your deposit ??

    What is the cost of new house , existing assets , and liabilitys .. I dont think they the builders can force you into bankruptcy , but they might saddle you with a big "losses/expenses" claim ..
    Oh dear ..sounds like lawyers/solicitors ...
  • Sell the flats before declaring bankruptcy is a better choice
  • it is not guaranteed that I will declare BR as it will only be as a last resort.. but I was planning on remortgaging my flat in order to release equity from it so that I can help with my son's with a deposit on a small flat...

    would I be allowed to do this and in case that I do have to declare BR (if I had to do that it wouldn't be for say 12 months) will this deposit money for my son be safe?
  • TheGardenerTheGardener Forumite
    3K Posts
    Part of the Furniture 1,000 Posts Name Dropper
    ✭✭✭✭
    If you do declare BR then no, you wont be able to gift money to your son and if you did and then went BR, the OR can and probably would ask your son for the money back so it can be distributed to creditors. The OR will go back more than 12 months.
    Do you have other debts or is it just the new build?
  • edited 30 December 2018 at 11:43AM
    FestiveJoyFestiveJoy Forumite
    229 Posts
    edited 30 December 2018 at 11:43AM
    skillboy wrote: »
    it is not guaranteed that I will declare BR as it will only be as a last resort.. but I was planning on remortgaging my flat in order to release equity from it so that I can help with my son's with a deposit on a small flat...

    would I be allowed to do this and in case that I do have to declare BR (if I had to do that it wouldn't be for say 12 months) will this deposit money for my son be safe?

    So you've just lost a wedge of money over-extending yourself by agreeing to purchase a property you say you can no longer afford to complete on.

    And now you are planning on borrowing even more money to give to your son, which you already are thinking you cannot afford to repay, and so are considering going bankrupt instead once you get the money.

    I'm sure that will be ok. The 20-25% equity you have in your property portfolio will probably cover your debts, (because you will only be able to borrow about 15% of one of those properties at the most) but I doubt there will be much left over after their distress sales, your bankruptcy fees, etc as well as all the heatache that will cause (or headf**k as Paul Bohill I think called it when he served a bankruptcy petition against Neil “Razor” Ruddock)

    Wouldn't it be better not to over-stretch yourself in the first place?


    :xmastree::xmastree::xmastree::xmassign:
  • skillboyskillboy Forumite
    106 Posts
    If you do declare BR then no, you wont be able to gift money to your son and if you did and then went BR, the OR can and probably would ask your son for the money back so it can be distributed to creditors. The OR will go back more than 12 months.
    Do you have other debts or is it just the new build?


    Just the new build...
  • skillboyskillboy Forumite
    106 Posts
    FestiveJoy wrote: »
    So you've just lost a wedge of money over-extending yourself by agreeing to purchase a property you say you can no longer afford to complete on.

    And now you are planning on borrowing even more money to give to your son, which you already are thinking you cannot afford to repay, and so are considering going bankrupt instead once you get the money.

    I'm sure that will be ok. The 20-25% equity you have in your property portfolio will probably cover your debts, (because you will only be able to borrow about 15% of one of those properties at the most) but I doubt there will be much left over after their distress sales, your bankruptcy fees, etc as well as all the heatache that will cause (or headf**k as Paul Bohill I think called it when he served a bankruptcy petition against Neil “Razor” Ruddock)

    Wouldn't it be better not to over-stretch yourself in the first place?


    :xmastree::xmastree::xmastree::xmassign:


    Of course! It was a bad error (due to greed) that made me miscalculate in the first place. Normally I am pretty conservative but got carried away when prices in London shot up in 2012 to 2014.... BR would be the last resort, I will do everything I can not to get to that point..
This discussion has been closed.
Latest MSE News and Guides

Energy price cap could be extended beyond 2023

New plans have just been announced by the Government

MSE News

Cheap contents insurance for tenants

DON'T assume your landlord covers you

MSE Guides

Summer sizzlers round-up

Incl £2ish sun cream & £1.50 disposable BBQs

MSE Deals