Interest only mortgage with mortgage term ending and struggling to sell, thinking of going bankrupt.

Iansellers

Is voluntary surrending my property technically the same as repossession?

luvchocolate

RepIansellers said:

Is voluntary surrending my property technically the same as repossession?

Repossessed can take quite a while...10 month's missed payments then court case..extra time given to leave. 
This was pre Covid and believe it could take longer now.

silvercar

I would suggest you post on the mortgage board, there may be more solutions open to you. Your existing lender may do a re-mortgage, given that they have already given you a mortgage on the property so already carry some risk. 

silvercar

sourcrates said:

Debts are repaid in order of importance, so first order of preference would be the CO, then the outstanding mortgage, all it would do is leave you with a larger shortfall, making repayment even more unlikely.

If you went down the route you describe, they probably wouldn't start collection activity on the shortfall debt for at least 12/24 months, maybe more.

I`m not saying bankruptcy isn`t the right choice here, it may well be at some later point, but there is no need to consider it until the house situation has been dealt with.

Small correction here, the mortgage is always the first charge on the property, the charging order would have come after the purchase & mortgage so would be further down the priority order. In this case the car loan company probably wouldn't see a penny.  

Iansellers

silvercar said:

I would suggest you post on the mortgage board, there may be more solutions open to you. Your existing lender may do a re-mortgage, given that they have already given you a mortgage on the property so already carry some risk. 

Thanks for your help but unfortunately as I said initially it's not an option open to me I'm afraid. Bankruptcy seems the only way to clear the mortgage and mortgage shortfall plus the charging order. I wished it wasn't as I have a good credit rating at the moment and realise that will be shot for 6 years if I go bankrupt.

Iansellers

JCS1 said:

Once the property was repossessed the debt becomes unsecured and would then be included in the existing bankruptcy.

Just make sure you don't sign any paperwork acknowledging the mortgage as a debt after declaring bankruptcy.

That's good to know, so even if I went bankrupt whilst upto date on everything but after voluntary surrending my property any mortgage shortfall even if occured 8-12 months after the initial bankruptcy would be covered in the original bankruptcy.

luvchocolate

That's absolutely right. 
A mortgage taken out before bankruptcy..the shortfall will fall into it 1 year....10 year whenever 

silvercar

Iansellers said:

silvercar said:

I would suggest you post on the mortgage board, there may be more solutions open to you. Your existing lender may do a re-mortgage, given that they have already given you a mortgage on the property so already carry some risk. 

Thanks for your help but unfortunately as I said initially it's not an option open to me I'm afraid. Bankruptcy seems the only way to clear the mortgage and mortgage shortfall plus the charging order. I wished it wasn't as I have a good credit rating at the moment and realise that will be shot for 6 years if I go bankrupt.

Your choice, but asking your existing lender seems relatively pain free and could solve your problems. 

enthusiasticsaver

I can see why you are overwhelmed but taking the nuclear action of handing the keys back, going bankrupt, giving up your job and moving in with family is one option but not the only one.  You say that approaching your current lender is not an option presumably due to the length of the lease? They may be flexible on this given your interest only mortgage is already with them and these days repossession is very much a last resort.

As your other debt is manageable  I would not rush to hand keys back and jump straight to handing back keys. Why would you need to give your job up? To avoid an attachment of earnings?  What will you live off given you will be resigning so unlikely to get much in the way of benefits or is your family offering to support you with living expenses as well as housing you? 

Staying put is another option and making an agreement with your current lender may be the less stressful in the end for you.  How much is the mortgage and what is the value of the flat as it stands with the short lease?  

None of this will be quick so it may well be a lot longer than 6 years and bankruptcy has all sorts of other implications not just on credit applications but renting applications should you decide living with family doesn't work and on future jobs. Also as sourcrates says you should hold off on bankruptcy until the property is actually repossessed or surrendered and the presumed negative equity is a reality. The charging order comes after the mortgage in priority. The negative equity and any other unsecured debt comes last. 

 I am not saying you should not do it but it is something you should carefully consider.  

Iansellers

silvercar said:

Iansellers said:

silvercar said:

I would suggest you post on the mortgage board, there may be more solutions open to you. Your existing lender may do a re-mortgage, given that they have already given you a mortgage on the property so already carry some risk. 

Thanks for your help but unfortunately as I said initially it's not an option open to me I'm afraid. Bankruptcy seems the only way to clear the mortgage and mortgage shortfall plus the charging order. I wished it wasn't as I have a good credit rating at the moment and realise that will be shot for 6 years if I go bankrupt.

Your choice, but asking your existing lender seems relatively pain free and could solve your problems. 

Okay thank you, it's just a bit overwhelming for me at the moment. Thank you for your suggestion, I'll certainly think about it seriously.