Is the Help to Buy Loan written off on bankruptcy

coypondboy

Hi,
with a lot people in financial difficulties at the moment and looking at debt forgiveness I wondered if this applies to Help to Buy Loans in the event of bankruptcy as it is a government backed scheme similar to student loans (can't go bankrupt).
My friends situation  Leasehold flat in London worth £0 due to cladding issues, 150k help to buy loan, 400k mortgage can't afford new service charges of £15,000 for 2021 having risen from £2,500 in 2020.
Any thoughts ?     

sammyjammy

What a dreadful situation for him.  I think he probably needs some specialist advice but I don't see why the Help to Buy loan would make a difference?  I think if it were me I would stop paying mortgage/service fees to gather myself a deposit for a rental and then "hand the keys back"  Eventually it will be repossessed  and will then become unsecured lending and can be included in bankruptcy.  I would imagine his mental health has been suffering for such a long time, that's what he needs to put first IMO.

I'm sure @fatbelly and @sourcrates can advise x

sourcrates

I agree he needs to take advice from a professional in these matters.
In my opinion though, the help to buy loan would be vested in his bankruptcy, if, for example he just handed the keys back and walked away, it would become just another unsecured debt, unless there is a clause in the agreement that prevents this, you can still go bankrupt with a student loan, its just that debt would not be included in the bankruptcy.


Lets assume the loan would not be included, @ 150k its never going to be re-paid, if it were treated the same as a mortgage shortfall debt, then basically if you don`t have the money to pay it, or make a reasonable offer, then it just does not get pursued, because it`s pointless basically.
They can`t take what you don`t have can they.

coypondboy

The only difference is this is tax payers money like the student loans so presume the debt would not be included in the bankruptcy.  I think there are tens of thousands of people who will be in a similar position so could be a big bill for the taxpayer just like student loans what % of those will be repaid?  

sourcrates

coypondboy said:

The only difference is this is tax payers money like the student loans so presume the debt would not be included in the bankruptcy.  I think there are tens of thousands of people who will be in a similar position so could be a big bill for the taxpayer just like student loans what % of those will be repaid?  

Don`t presume anything, give National Debtline a call, they will be able to give you a definitive answer on this.

Follow this link -
Debt advice | Free debt advice | National Debtline | National Debtline

coypondboy

Just spoke to them and yes it is written off like a mortgage, this will also apply to the new loans likely to be announced in the budget to enable freeholders to get on with the work of fixing the fire safety issues with the loan backed by the government over 30 yrs to be repaid by the leaseholder through the service charge.  If this goes ahead will be a lot more bankruptcies to allow people to avoid this debt and get on with their lives like the situation my friend is in who is a typical buyer in London over the past 10 years having graduated and moved to london for work, saved a 5% deposit and took out a shared ownership help to buy loan.  The tax payer will be on the hook for billions and flat prices will plummet. 

coypondboy

Keys handed back as received a new demand with an increase of 25% on previous costing due to current labour/materials shortgages.  His only other option was a cash buyer who would buy for 50% of asking price will update you how he gets on, bank were shocked as not seen this since early 90's. 

Thrugelmir

coypondboy said:

His only other option was a cash buyer who would buy for 50% of asking price will update you how he gets on, 

What's the asking price? 

coypondboy

250k flat worth 600k

TripleH

I feel a lot of sympathy for those in careers where insolvency can get you sanctioned by your professional body who are stuck in a situation like the Op's friend. More so because I worked with a number of accountants when I was in London and I know one or two were looking to buy flats (this was 5 years ago).