COMPLETELY STRESSED OUT - Parents may lose rented property :(

hoffage123

Hi,

I filed for bankruptcy two days ago after having undergone a year and a half of not being able to meet repayments, final demand letters etc etc ... I took advice from CAB and CCCS on it, and they assured me it was the right thing for myself to do ....

Now at the time I thought that I had no assets ... when I was a student back in 2003, my parents (for their own unknown reasons) bought a house and put it in my name ... I only found out about this in 2004 when a demanding letter came from the council, asking why I hadn't paid my council tax ... so angry discussions and eventually I transferred the property over to my grandmother for the value of £1, because (in my naivety) I assumed this would be the end of it ....

Of course now I am bankrupt I didn't realise that actually I had to declare this property and I am freaking out because I didn't put it on my petition ... so I am going to tell the OR about it when they do my telephone interview ... but more worrying I phoned the Insolvency Service twice today, and got different answers about what would happen to that house. One answer was that because I hadn't actually paid into (mortage etc) and that my parents had profited from it (they put tenants into it) that the OR wouldn't be interested in it ... so I thought phew, but then I called again and this other guy said it COULD be claimed as an asset in Bankruptcy even though I had never originally signed my name to it, it had been gifted to me in my name (like a car the analogy was used, if someone buys you a car, it is your car and therefore can be used as an asset even if you refuse the use of it, which is what I did with my parents when I found out, because it felt quite dodgy what they were doing ...) ...

So I feel completely stressed that the OR could potentially make my folks sell the house and pocket all the equity (can they do that? If the equity is £40,000 and my debts are £20,000 would they keep the extra £20,000?)

I am kicking myself because I should have looked into this further before I went bankrupt ... I feel so stupid, and like I don't want to be done for a Bankruptcy offence because I didn't do my research, but at the same time I know that the OR will find out anyway through the Land Registry search ....

I know that my folks could buy the beneficial interest (which I guess would be the equity) ... would they have to remortgage???? I feel like I've dug myself a big hole now, as my family are the kind to hold grudges, even if they started off the process themselves by gifting the house to me without telling me, for their own profit ....

What do I do???????

Conor_3

Suck it and see. It all depends on the timing. If it was over 2 years ago, and before you started accruing the debts, you might be lucky. Any less and I doubt it.

If your parents don't have the money, they'll have to remortgage but if it's in your grandmothers name still, she'll be the one the OR deals with. That's their problem IMO as it was them who created the mess in the first place.

If they're going to hold a grudge about something which was entirely of their creating, then that's their problem and you're better off without such a family.

NekoZombie

Conor wrote: »

If they're going to hold a grudge about something which was entirely of their creating, then that's their problem and you're better off without such a family.

I don't understand this statement. The OPs parents have tried to be generous; it hardly their fault that the OP is now in a difficult situation.

misscomickat

They were not "being generous" from the way I have read it. They weren't buying a house to give to their son, but simply putting it in his name for some unknown reason.

Hi Saj by the way! Are you sure it's wise to have a username with your full name on it?

silvercar

...when I was a student back in 2003, my parents (for their own unknown reasons) bought a house and put it in my name ...

Your sole property, they would then claim it was your principal private residence and therefore exempt from Capital Gains Tax on sale.

... I transferred the property over to my grandmother for the value of £1, ...

If it was worth more than £125,000 at that time, your grandmother should have paid stamp duty.

I must say transferring a property to a grandmother is the most stupid inheritance tax planning known (unless your grandmother has no assets of her own); it also runs the risk of the property having to be sold to pay for her care, should that be needed.

At the time you transferred it, had it increased in value? by more than about £15,000? If so you should have had a CGT liability and paid tax on the gain, unless it was really your home at any point.

One answer was that because I hadn't actually paid into (mortage etc) and that my parents had profited from it (they put tenants into it) that the OR wouldn't be interested in it ...

Could be true, your parents only acted to avoid tax and so they held the beneficial interest the whole time and still do. Lets hope the OR doesn't pass information to the revenue!

but then I called again and this other guy said it COULD be claimed as an asset in Bankruptcy even though I had never originally signed my name to it, it had been gifted to me in my name

Possibly. Who put your signature on the Land Registry documents?

I wonder if there was ever a mortgage in your name! Was the rental income declared? Without a mortgage there would have been a profit made on the rental income which someone should have been declaring. If there was a mortgage it would have had to be in the name of the registered owner.

Did you live in this house ever? This could limit the tax liability for CGT and rental income.

So I feel completely stressed that the OR could potentially make my folks sell the house and pocket all the equity (can they do that? If the equity is £40,000 and my debts are £20,000 would they keep the extra £20,000?)

They could do that, if they decide it is your property. If the sale generates enough money to clear the debts, your bankruptcy would be anulled and your creditors paid off.

The only silver lining to this cloud is that, if you do owe the tax man anything, it can be included in your bankruptcy.

What do I do???????

Big family discussion I think.

but at the same time I know that the OR will find out anyway through the Land Registry search ....

I don't know if they search the whole Land Registry database for the last 3 years?

NekoZombie

Ahhh, I see! Well, the situation is something they'll have to deal with I guess.

hoffage123

Thanks for the replies so far (and I take the point about my username being my real name maybe not being the wisest thing to do) ... I never lived in the property, it was a property that was next door to one that the family lived in when we were younger .... I don't know what to do really, other than be honest with the OR about my lack of knowledge of this, and hope that my parents can sort their stuff out as well ... it is more my dad that I'm worried about, I guess the best case scenario might be that the OR discounts it, or puts a charging order of some sort on the house, the worst is that they make my folks sell the house and pocket the equity (but again, I'm not sure if the OR takes all the equity, or just enough to settle my debts) ...

I'm quite worried about things potentially having been signed without my knowledge, but I guess this will bring everything out .... I really wanted a fresh start, and it is looking like the nightmare is going to continue ....

Re: my grandma, the situation gets even more confusing, because she lives overseas/has no other assets, and she isn't a British Citizen, so I'm not sure what the implications of that is going to be ...

hoffage123

Update:

They have checked the paperwork and it was signed over on the 29 August 2002, not 2004 ... so 5 years 2 months and 25 days ... I am choosing to believe them I guess, as hopefully they wouldn't screw me over completely, it means I don't have to declare it ...

Now I can concentrate on getting my life back together, financially and everything else ...

Thank you guys for your support, I appreciate it *hug*

Richard_S

sajadhoffmanhussain123 wrote: »

Update:

They have checked the paperwork and it was signed over on the 29 August 2002, not 2004 ... so 5 years 2 months and 25 days ... I am choosing to believe them I guess, as hopefully they wouldn't screw me over completely, it means I don't have to declare it ...

Now I can concentrate on getting my life back together, financially and everything else ...

Thank you guys for your support, I appreciate it *hug*

Hi sajad,

I think what the whole situation will revolve around is when you actually became insolvent and when you gifted the property to your Grandma; if you were still solvent when the transaction took place then you have nothing to worry about.

If you have a clear conscience then there's no reason why you should mention it.:D

Regards

Richard

rog2

sajadhoffmanhussain123 wrote: »

Update:

They have checked the paperwork and it was signed over on the 29 August 2002, not 2004 ... so 5 years 2 months and 25 days ... I am choosing to believe them I guess, as hopefully they wouldn't screw me over completely, it means I don't have to declare it ...

Now I can concentrate on getting my life back together, financially and everything else ...

Thank you guys for your support, I appreciate it *hug*

Personally, I don't think the situation will be affected by your bankruptcy, since you, personally, had nothing to either gain or lose out of the affair. Normally, the OR will only look back into your finances for the last two years, unless there is something that is 'jumping' at them. I believe that they can go back five years, but it would be difficult to prove that you 'undersold' the property in the knowledge that you were facing bankruptcy in five years time.
However - the whole episode does raise questions as to whether or not the actions of your parents may have been fraudulent, at the time, but that is another question.

The_Debt_Monkey

Richard_S wrote: »

Hi sajad,

I think what the whole situation will revolve around is when you actually became insolvent and when you gifted the property to your Grandma; if you were still solvent when the transaction took place then you have nothing to worry about.

If you have a clear conscience then there's no reason why you should mention it.:D

Regards

Richard

Incorrect. Section 339 of the IA covers TUV's. If party is deemed to be connected then insolvency is presumed. But, they can only go back five years from the making of the order. Having said that, s423 covers Transactions defrauding creditors and that has no time limit but the test is much more difficult to prove so i think you will be ok.