Protecting my home from creditors

HomeSteader444

Is there a watertight legal way to protect the house I live in from creditors in the event of my property rental business failing due to Coronovirus & its impact on my tenants (students at university & wage earners)I have mortgages,though not on my home,but my income will crash in a worst-case-scenario situation(universities closing,unemployment soaring/tenants without income.I am over 70 & don't want my home to be repossessed in the event of falling behind with mortgage payments

Yahoo_Mail

Other than not owning it, no.

HomeSteader444

Home protection trusts?

bradders1983

How does the OP propose to pay back his creditors in the worst case scenario then?

Grumpy_chap

Why not sell the rental properties to release sufficient capital to pay off whatever mortgages are remaining?  The other properties (including your home) will remain mortgage free and therefore protected from repossession (as there are no longer any creditors).  I assume at least some of the student properties became vacant over the summer so would be available to sell.

jonesMUFCforever

Home protection trusts - whatever they are? -- Far too late now the borrowing is done, the only 100% way to keep you r home is to pay for it. Is it security for any business guarantee?

Jeremy535897

My understanding is that OP owns his own home outright, and other rental properties subject to mortgages. That would mean that the first resort of the mortgage lenders would be the homes on which the mortgages are secured. There would only be a risk to OP's home if there was insufficient equity in a property or properties subject to the mortgage(s). Mortgagors can seek payment of outstanding capital and interest within time limits (12 years and 6 years respectively in England).

Asset protection trusts have come in for some bad press, as their purpose is normally to avoid liability for future care home fees. Local authorities have been successful in arguing that this is a deprivation of assets and therefore is ineffective to reduce capital. More to the point here, asset protection trusts can be set aside if the intention is to avoid paying creditors, but it would be hard for creditors to do that if, at the time the asset protection trust was made, there was sufficient equity in the mortgaged properties to meet all outstanding balances.

I would strongly recommend that OP seeks legal advice as soon as possible. In the meantime, the following page gives more information regarding the pursuit of mortgage debts:
https://www.nationaldebtline.org/EW/factsheets/Pages/mortgage-shortfalls/mortgage-debt.aspx

davelewis

Would it also depend if the OP owns the investment properties as a 'Limited Company?'
If he owns the investment properties as a private individual, unfortunately the creditors can indeed pursue his own home for the shortfall should the investment properties fail to satisfy the mortgages.

Another thought is that the mortgage companies for the investment properties may look favourably on accepting tenants that are on 'Universal Credit' should unemployment peak. They won't want to repossess unless they absolutely have to, although BTL mortgages are seen as 'business loans' not attracting the same protection as residential mortgages.

[Deleted User]

Seem your iPhone and cancel Netflix, that's the usual advice given to people trying to raise money to buy a house.

Thrugelmir

As you are over 70. Is there still a need to take excessive risk. Start to liquidate the portfolio, derisk and live off the capital. 

HomeSteader444

Worst case scenario I was imagining was a property price crash & ending up in negative equity,or a moribund property market & too much supply,little demand due to economic situation in UK-mass unemployment etc.I have a mortgage-free property I can sell now which would help.If it was in the SE-problem diminshed.But its in the NW & despite being on the market for months,only 2 viewings,no offers.Brexit & pandemic making an already  difficult market worse in the NW.
If I release equity from my home,I get a lump sum & the property would be secure until my death.I'll go for that.