Bankruptcy Help

Cramby91

Would appreciate any advice. 

I think I am being forced to make myself bankrupt and unsure if this is the best option or whether I have any other options?

I owe a business £400k and they started civil proceedings against me nearly 2 weeks ago. I will ultimately lose as only have a limited defence.

I have a mortgaged property that I own with my wife.

These are the rough numbers

Property Value: 480,000
Mortgage remaining: 280,000

Equity: 200,000 (100,000 me, 100,000 wife)

Other Debts:

Family members 300,000
Credit cards 10,500/11,000
Other debts: 2,000

Ideally I would like my Father in Law to buy my share of the mortgage so my wife and children can keep the family home (not sure if Official Receiver or bank would allow this)

What are the advantages/disadvantages or bankruptcy?

Minkym00

You may want to consider waiting to see the outcome of the proceedings first. If they go against then you will have a judgement debt made against you. The creditor can then enforce that debt by pursuing you to bankruptcy, but all of that will take months. Plus they will have to pay the court fees (£1,500 petition deposit plus legal costs) to make you bankrupt so why would you want to fork out £680 to do it yourself when you don't have to? 

The trustee (be that the Official Receiver or an Insolvency Practitioner) will always seek to find a 3rd party to buy out your interest in a property first, so your father-in-law can absolutely do that. He wouldn't be buying your legal share as such, just your interest in it, so there's no need to actually involve the bank. The property remains in your name at the Land Reg and you remain on the mortgage.

DullGreyGuy

Think you mean he buys your interest in the property? Were he to buy your share of the mortgage you'd be paying him to take on the liability of the repayments. 

Where has the £700,000 gone? A failed business venture presumably? Were all debts to you personally or to the company? 

Minkym00

Also, another reason to wait is to see what the creditor actually does. If they make you bankrupt then your only asset (equity in the property) would be split between all your creditors, and that's only after the trustee has taken a load of fees. They might actually end up with very little in terms of a dividend.    

Instead, you could suggest to them that they get a charging order and secure their debt on your equity in the property with an written agreement that they will not force a sale. That way they will get whatever your share of the equity is whenever it's sold and will likely get a better payout.  

Cramby91

DullGreyGuy said:

Think you mean he buys your interest in the property? Were he to buy your share of the mortgage you'd be paying him to take on the liability of the repayments. 

Where has the £700,000 gone? A failed business venture presumably? Were all debts to you personally or to the company? 

All to me personally.

I should have stopped before borrowing from family is my biggest regret. 

Cramby91

Minkym00 said:

You may want to consider waiting to see the outcome of the proceedings first. If they go against then you will have a judgement debt made against you. The creditor can then enforce that debt by pursuing you to bankruptcy, but all of that will take months. Plus they will have to pay the court fees (£1,500 petition deposit plus legal costs) to make you bankrupt so why would you want to fork out £680 to do it yourself when you don't have to? 

The trustee (be that the Official Receiver or an Insolvency Practitioner) will always seek to find a 3rd party to buy out your interest in a property first, so your father-in-law can absolutely do that. He wouldn't be buying your legal share as such, just your interest in it, so there's no need to actually involve the bank. The property remains in your name at the Land Reg and you remain on the mortgage.

The bank would be made aware of my bankruptcy though? Would make it impossible to borrow again?

Cramby91

Minkym00 said:

Also, another reason to wait is to see what the creditor actually does. If they make you bankrupt then your only asset (equity in the property) would be split between all your creditors, and that's only after the trustee has taken a load of fees. They might actually end up with very little in terms of a dividend.    

Instead, you could suggest to them that they get a charging order and secure their debt on your equity in the property with an written agreement that they will not force a sale. That way they will get whatever your share of the equity is whenever it's sold and will likely get a better payout.  

Thank you for this suggestion!

Grumpelstiltskin

If you are bankrupt the last thing you want to think about is borrowing again, in fact with the bankruptcy on your record the chance of borrowing is zero.

Minkym00

The bank would know about your bankruptcy, yes, but I'm not sure what you're referring to when you mention borrowing again? If you're FIL buys out your beneficial interest that doesn't affect the legal title or the mortgage and, unless you are in arrears, the bank won't care that you've been made bankrupt. For a jointly owned property it is only the bankrupt’s beneficial interest in the property that vests in the bankruptcy. You might have issues getting a mortgage in the future as some banks want to know if you've ever been bankrupt, but I wouldn't be concerned about that now if I were you. 

Cramby91

Sorry I didn't mean borrow again, I accept that I won't be able to have any new borrowing. It was just the house that I meant so renewing the mortgage when the fixed period was finished.

Minkym00

You can get a mortgage but, if you are made bankrupt, you'll probably find that the best interest rates won't be open to you until your bankruptcy is dropped from your credit record (which is 6 years).