Secured loan

sallymeak

Hi

I will be having to declare bankruptcy soon due to our joint mortgage being on interest only and us not having the means to pay it back at the end of the term.

We have a secured loan against the property and I just wanted to clarify that this would be put in the bankruptcy as it’s secured on the property?

Sadly the house is in 40% negative equity so there is no chance of pulling it back.

Thanks

RattyIrk

If the loan is joint then arguably your share could be included in the bankruptcy. However most loans are joint and several which means they could decide to just go after your other half for it.

Sorry to hear about the negative equity. Depending on your partner's circumstances might be worth them also going BR and getting whole lot written off. That would result in the house being repossessed so you would need an alternative place to live and check for knock on effects such as if it would impact either of your jobs.

sallymeak

Sadly both of us will be going bankrupt as joint on the mortgage. It’s a horrible situation but I can see no other way out

RattyIrk

BR is not pleasant but is something you recover from and is often better than the alternative. Get the debts written off, get through the bankruptcy and any payment plan and get on with life. You can then put it all behind you.

sallymeak

Thank you. Hopefully it won’t be too stressful and I suppose nothing can be quite as stressful as mounting debts and a mortgage you can’t pay hanging over you

ACG

Have you spoken to the companies involved?
If they make you bankrupt they will lose over £40k. They may allow you to switch to repayment instead - obviously this depends on your ages and ability to repay the mortgage, but it might be an option?

sallymeak

We thought about this but the problem we have is:

Mortgage value £89000
Secured loan against property £21000

Property value £42000

So I don’t think we could. I am 42 but I thought about a loan that would consolidate it all as a higher advance mortgage or something but I can’t get credit and I can’t see anyone loaning against this house at the value

silvercar

Is that your only debt?

If so you could stop paying the mortgage, save up a rental deposit, move into a rental. Hand the keys back to the mortgage lender and wait and see how the dust settles.

No urgent need for bankruptcy.

sammyjammy

Whats happened to the value of the house that you've been able to have that much lending on it and its now worth that?

Sorry for your situation but it makes sense to sort it all out and move on, you've still got a whole life in front of you to recover from it financially and emotionally.

sourcrates

The OP is going to be left with a massive mortgage shortfall if they just hand the keys back, around 70k, as houses at auction rarely fetch what they are worth.
This would buy them some time though, as these shortfalls are not normally chased for a couple of years under these circumstances, and if they have no way of paying back that money, there is a chance the lender may write off the debt at some point, but there are no guarentees.

sallymeak

There’s 12 houses on the block and 6 were sold by auction for £40-50k so it’s had a massive knock on effect to the rest of the road. They just don’t seem to sell for some reason which is strange as they’re semi rural in the outskirts of a nice village. A new development is underway over the road and not sure if this may help or hinder prices