Property Charges

LimaSigma1972

Hi, I hope I have the correct section. Please accept my apologies if not. I have roughly £172k of debt secured against a property that is worth £140k to £165k the house needs roof repairs of roughly 10k the and the £165k valuation is if the roof was repaired based on 2 local estate agents valuations. My mortgage is £145k Arrears another £13k charge from council tax against property and charge from water company against the property. Hence I am in negitve equity by approx £52k unless I found £10k for the repairs. Putting me roughly £7k in negitve equity and about 3k of unsecured debts. I am currently not working and just managing on benifits. My family have offered to  potentially pay rent for 1 to 1.5 years at a cost of £10k total should I go bankrupt. The current mortgage interest is about £715 a month renting a smaller property £900 + a month. Because there have been months where my income is less than my outgoings the advice from Citizens Advice has been mixed although now eating towards Bankruptcy. My concern is not understanding fully the implications. What happens if I declare myself bankrupt and the recover is not interested in my property because of the negative equity. Could I find myself bankrupt with 3k of unsecured debts written off but still being facing problems down the road from the secured debts on the property? or is it more likely that the recover will take control of the property and pay the mortgage company from its sale then writing off the additional charge orders due to the negative equity? Does anyone have any experience or understanding of similar situations that they could highlight. The local Citizens advice team although helpful seem to have some gaps in knowledge in such a situation. Any help or feedback would be much appreciated. 

Keep_pedalling

Can you clarify if this is actually your situation or someone else you are asking on behalf of? I only ask because your last thread stated that your house was worth £300k and you were concerned about IHT on your death. 

https://forums.moneysavingexpert.com/discussion/6611365/inheritence-tax-on-family-home#latest

Brie

You might find it helpful to read this......Debt solutions - what is your best option?

LimaSigma1972

Reply to keep pedalling You make a good point, both scenarios are hypothetical but close to situations I or someone close to me are going through.One is more vague as to who it applies to than the other. But both are designed to be surficiently vague to help keep those involved anonymous. Essentialy any answers from people who have been in or helped someone in similar situations will help me and others involved make more informed decisions moving forward. 

sourcrates

Hypothetically speaking, debts secured by a mortgage are not covered by bankruptcy.

The OR may choose to sell the property to pay off any outstanding mortgage first, then any outstanding secured loan, if the sale of the property does not cover all debts secured on it, the remaining "shortfall" debt becomes unsecured, and should be vested in the bankruptcy, should be.

It may depend on specific circumstances, certain legal issues, I am not an expert in this field I have to say, but having had a house repossessed, although not a bankrupt, that is the process as I understand it.

ManyWays

Secured debts are covered by bankruptcy, but the lender retains the security, so if you stop paying the lender can repossess the property. 

sourcrates

ManyWays said:

Secured debts are covered by bankruptcy, but the lender retains the security, so if you stop paying the lender can repossess the property. 

Which is what I meant, as they have the security of the asset to realise.

I assumed that went without saying.....

fatbelly

LimaSigma1972 said:

Hi, I hope I have the correct section. Please accept my apologies if not. I have roughly £172k of debt secured against a property that is worth £140k to £165k the house needs roof repairs of roughly 10k the and the £165k valuation is if the roof was repaired based on 2 local estate agents valuations. My mortgage is £145k Arrears another £13k charge from council tax against property and charge from water company against the property. Hence I am in negitve equity by approx £52k unless I found £10k for the repairs. Putting me roughly £7k in negitve equity and about 3k of unsecured debts. I am currently not working and just managing on benifits. My family have offered to  potentially pay rent for 1 to 1.5 years at a cost of £10k total should I go bankrupt. The current mortgage interest is about £715 a month renting a smaller property £900 + a month. Because there have been months where my income is less than my outgoings the advice from Citizens Advice has been mixed although now eating towards Bankruptcy. My concern is not understanding fully the implications. What happens if I declare myself bankrupt and the recover is not interested in my property because of the negative equity. Could I find myself bankrupt with 3k of unsecured debts written off but still being facing problems down the road from the secured debts on the property? or is it more likely that the recover will take control of the property and pay the mortgage company from its sale then writing off the additional charge orders due to the negative equity? Does anyone have any experience or understanding of similar situations that they could highlight. The local Citizens advice team although helpful seem to have some gaps in knowledge in such a situation. Any help or feedback would be much appreciated. 

Explain how you think bankruptcy is going to help.

You only mention 3k of unsecured debt.

Post a soa and let the people who enjoy a difficult puzzle to work their way through your situation

ManyWays

If your family can act as a guarantor on a tenancy and give you the bankruptcy fees, then you can move out, stop making any payments to the mortgage or any secured debt and go bankrupt. There is no need for family to pay all the rent, you should be able to get some of it covered by benefits. 

The Official Receiver isnt likely to have any interest in the property, so the mortgage lender will repossess it at some point to minimise their losses. The other secured debts however do not suddenty become unsecured debts that you are liable for as bankruptcy will mean you have no liablility for any previous debts.

The only problems that can happen is if the loacl council carries on billing you for council tax before the proporty is repossessed. Your local Citizens Advice may know if this is a problem with your local council or not. 

It isnt clear to me what your local Citizens Advice has been worried about, so I agree with @fatbelly that seeing a SOA would be useful. If you don't want to post it here, talk to National Debtline on 0808 808 4000 and see if they confirm the advice from Citizens Advice to go bankrupt.