Handing keys back to lender - before or after bankruptcy??

Rumba

Evening all
After months of research and planning I have finally decided to go bankrupt.
The posts on this forum have been a massive help, so thanks everyone.
My husband and I have separated and we plan to both go bankrupt, hand keys back to our jointly owned (mortgaged) home and move on.
Just unsure whether to hand keys back before or after bankruptcy? Or doesn't it matter??
We also have a secured loan against the property, the Help to Buy equity loan - not sure if this makes a difference?
Any advice would be greatly appreciated.
Thanks in advance

mwarby

It can take up to 3 years for the OR to deal with a property in bankruptcy, assuming it’s still your home. If you need to rent somewhere else I would go this before going bankrupt, as you may struggle once bankrupt, I would wait until everyone is setup in new accommodation before going bankrupt or talking to
lender re repossession. 

Rumba

Hi mwarby
Thanks for the quick reply.
We have, me and kids are renting and husband also found rented accommodation. Both landlords know of our situation and are ok with it, as long as we continue to pay rent.
The house has been empty and on the market since November 19.
Lender and HTB gave us a few months breathing space to try and sell but to be honest, there's very little (if any) equity and after agents and solicitors are paid we may as well hand it back.
Just not sure when to do it or the best way to go about this?

mwarby

If there's little to no equity, the OR is unlikely to be in a hurry to sell the property. From what I can tell you would be able to start repossesion before bankruptcy, and you wouldn't be liable for any shortfall. I would however get proper advice on this from a debt charity like step change or CAB, most of the stuff I found while looking at this related to how to delay or stop repossesion, rather than getting it over with.

mwarby

Although if there no equity and you or husband could afford the mortgage repayment, it's very possible that the property wouldn't be repossesed, my replies assume you don't want to keep it, rather than you can't afford to keep it

Rumba

Yes you're correct, we don't want to keep it.
Our options are, sit with an empty property, wait to find a buyer and sell at a potential loss with all related costs involved then go bankrupt OR hand keys back to lender, go bankrupt and hopefully not be liable for any shortfall.
We have other unsecured debts if 30k+, the property in question isn't the reason we have decided on bankruptcy. We have spoken to Stepchange about the unsecured debt and the only other option was a 20 odd year DMP.
We can't afford the mortgage repayments (haven't paid mortgage since August 19) and related costs such as council tax, utilities etc. now we are paying rent and bills at new address.
Hope that all makes sense?!
Thanks again 

mwarby

AFAIK you wouldn't be liable for the shortfall if you went bankrupt, this is worth discussing with someone like stepchange who should be able to advise on bankruptcy. If you have a shortfall before bankruptcy(ie is repossessed  its then a unsecured debt, so falls under bankruptcy. If the repossesion happens after bankruptcy be careful what you sign. You may want to look at debt camel for more info

ToxtethO'Grady

If you are going bankrupt it doesn't really matter how you do it if you enter the details on your application as any shortfall is included even if the lender doesn't repossess until after you go BR.

Debt Camel has a really good website about this https://debtcamel.co.uk/repossession-deed-of-acknowledgement/

As it says DON'T sign anything!

A slightly smoother way to do it is go for a quick sale, then you'll know your shortfall and all other bills will be ended, they all go in to the BR, no waiting around and having to get information or deal with your mortgage provider and debt collectors for the bills.

Hope this helps and good luck!

Rumba

Thanks both for the replies and link, so helpful.
Very interesting article which has answered some of my questions.
I have posted my original question on there and hopefully Sara will respond.
Really good to know there is support out there for people in this situation. 
I can't do a quick sale unfortunately, the help to buy loan requires an independent rics valuation to back up the offer price before they'll settle. Otherwise I would have reduced to get it sold quicker. Thanks though 
I'll post her reply if I get one...

Thingsarelookingup

We had a very similar situation a few years back (went BR in 2013). Include the debt in your BR.
Once you're out of the property, if your mortgage company are like ours, they will bombard you with various letters, calls .etc 
Do not sign anything and refer them back to the OR. It took about 8 months before our property was repossessed.
After discharge, my credit file started to improve quite quickly, aided by mobile phone payments and a small vanquis credit card, and most defaults fell off fairly quickly. After 6 years, the bankruptcy fell off my credit file, but the mortgage/loan stayed on their... i was a little worried and was starting to do some investigations (get statutory reports etc) last month, and to my surprise, all mention of the property/load default has fallen off, with no mention at all. It took 7 years, but my file is now rated as good and no one is chasing me for money... there is hope. Good luck to you.

Thrugelmir

Might as well hand the keys back to the lender and allow a voluntary repossession.