Voluntary Repossession

pistonbroke

I have asked this before, but I think it may have got lost in the depths of this forum

My OH and I are both undischarged BR and also have a mortgage with a secured charge equalling in -ve equity

Problem now is that the OH has lost her job, and there is no way we can afford to live on one wage. My only hope may be to give the house up and hopefully rent somewhere. My question is, if we do a voluntary repo on the house, what happens to the surpless charge after the house is sold?

Thanks

tigerfeet2006

The secured loan becomes unsecured and is included in your BR. Check out Scarlett_1974 BR diary there is some good advise on VR on it.

http://forums.moneysavingexpert.com/showthread.html?t=596237

pistonbroke

So they would add it to our BR even though we went BR last year?

tigerfeet2006

Yes they should do. I am sure one of the more experianced guys will be along soon to confirm.

NekoZombie

I'm not sure about this; could you not call you OR?

silvercar

I think you need to be careful here. Ask your OR for advice. Find out what would happen if you are discharged before the house sells.

CCCS_Matthew

Hi there,

I've done a bit of research on this as it's not something that comes up very often at all.

Bankruptcy states that any debt or liability to which the debtor may become subject after the commencement of the bankruptcy (including after discharge), by reason of any obligation incurred before can be included.

This does include mortgage shortfalls (providing the mortgage pre-dates the bankruptcy). It is irrelevant when the property was sold and the debt quantified, even if it is after discharge. So in short, even if you were to decide to give up the house after you have been discharged you will still have no liability for the shortfall.

I would strongly advise confirming this with the OR before proceeding with the voluntary repossession if this is something you have decided to ensure correct protocol is followed.

Hope this helps,
CCCS

fermi

Just to add to what CCCS_Matthew says:

a) Check with you OR before you do anything.

b) If you do a voluntary surrender then DO NOT sign any surrender forms that state that you remain liable for any shortfall or fees. You should not be liable, but it can make a very complicated legal wrangle for you and the OR if you sign anything like that.

Have a look at Scarlett's thread where they wrote a letter to do the voluntary surrender rather than use the mortgage companies forms.

pistonbroke

Thanks Matthew, I will contact them later today/tomorrow

Just standing back and looking at everything as a whole, the OH will easily be able to get another job because of her profession/qualifications. But we would still have a stupid large charge & mortgage to pay every month. Renting somewhere would reduce this by 1/4 easily! :eek: I know the IS will want some or all of what is left if we moved, but on the plus side after we finish paying the IPA we would have £2500 spare a month if we earn what we earn now...

Gonna take some thinking, I would prefer not to move, as we have pets, and nearly all the rented properties are stated as No Pets plus we would have to find a huge deposit.

silvercar

Others on here no much more than me, but I would want it spelt out by the OR that all of the following would be included in the bankruptcy:

The "negative equity";
arrears, even if occuring after bankruptcy and/ or discharge;
any selling costs, legal costs,, estate agents fees etc resulting directly from the voluntary repossession;
any early redemption charges on the mortgage that have been included because the repo date was before the end of the current deal.

I recall vaguely a thread or 2, possibly over a year ago, where the lender argued that the early redemption penalties couldn't be included in the bankruptcy as they didn't occur ( ie the house hadn't sold) prior to discharge.

Richard_S

Hi pistonbroke,

I definitely echo what the previous posters have said about getting confirmation from the O.R before you make a decision; it's too important to take a chance on.

We were in a similar position with the question of "what if the house sold after our bankruptcy and didn't clear the mortgage and/or secured loans". We got confirmation from the O.R before proceeding, and the relevant legislations is as follows:

In summary, what the regulations mean is that if you sell a property after being declared bankrupt then any shortfall is included in your bankruptcy. There was some confusion as to whether you had to declare bankruptcy after the shortfall was realised for it to be included.

380. Introductory
The next five sections have effect for the interpretation of the provisions of this Act which are comprised in this Group pf Parts; and where a definition is provided for a particular expression, it applies except so far as the context otherwise requires.
381. "Bankrupt" and associated terminology
(1) "Bankrupt" means an individual who has been adjudged bankrupt and, in relation to a bankruptcy order, it means the individual adjudged by that order.
(2) "Bankruptcy order" means an order adjudging an individual bankrupt.
(3) "Bankruptcy petition" means a petition to the court for a bankruptcy order.
382. "Bankruptcy debt", etc
(1) "Bankruptcy debt", in relation to a bankrupt, means (subject to the next subsection) any of the following -
(a) any debt or liability to which he is subject at the commencement of the bankruptcy.
(b) any debt or liability to which he may become subject after the commencement of the bankruptcy (including after his discharge from bankruptcy) by reason of any obligation incurred before the commence- ment of the bankruptcy,
(c) any amount specified in pursuance of section 39(3)(c) of the Powers of Criminal Courts Act 1973 in any criminal bankruptcy order made against him before the commencement of the bankruptcy, and
(d) any interest provable as mentioned in section 322(2) in Chapter IV of Part IX.
(2) In determining for the purpose of any provision in this Group of Parts whether any liability in tort is a bankruptcy debt, the bankrupt is deemed to because subject to that liability by reason of an obligation incurred at the time when the cause of action accrued.
(3) For the purposes of references in this Group of Parts to a debt or liability, it is immaterial whether the debt or liability is present or future , whether it is certain or contingent or whether the amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in this Group of Parts to owing a debt are to be read accordingly.
(4) In this Group of Parts, except in so far as the context otherwise requires, "liability" means (subject to subsection (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment and any liability arising out of an obligation to make restitution.
383. "Creditor" "security", etc
(1) "Creditor" -
(a) in relation to a bankrupt, means a person to whom any of the bankruptcy debts is owed (being, in the case of an amount falling within paragraph of the definition in section 382(1) of "bankruptcy debt", the person in respect of whom that amount is specified in the criminal bankruptcy order in question), and
(b) in relation to an individual to whom a bankruptcy petition relates, means a person who would be a creditor in the bankruptcy if a bankruptcy order were made on that petition.
(2) Subject to the next subsections and any provision of the rules requiring a creditor to give up his security for the purposes of proving a debt, a debt is secured for the purposes of this Group of Parts to the extent that the person to whom the debt is owed holds any security for the debt (whether a mortgage, charge, lien or other security) over any property of the person by whom the debt is owed.
(3) Where a statement such as is mentioned in section 269(1)(a) in Chapter I of Part IX has been made by a secured creditor for the purposes of any bankruptcy petition and a bankruptcy order is subsequently made on that petition, the creditor is deemed for the purposes of the Parts in this Group to have given up the security specified in the statement.
(4) In subsection (2) the reference to a security does not include a lien on books, papers or other records, except to the extent that they consist of documents which give a title to property and are held as such.
384. "Prescribes" and "the rules"
(1) Subject to the next subsection "prescribed" means prescribed by the rules; and "the rules" means rules made under section 412 in Part XV.
(2) References in this Group of parts to the amount prescribed for the purposes of any of the following provisions -
section 273;
section 346(3);
section 354(1) and (2);
section 358;
section 360(1);
section 361 (2); and
section 364(2)(d),
and references in those provisions to the prescribed amount are to be read in accordance with section 418 in Part XV and orders made under that section.
385. Miscellaneous definitions
(1) The following definitions have effect -
"the court", in relation to any matter, means the court to which, in accordance with section 373 in Part X and the rules, proceedings with respect to that matter are allocated or transferred;
"creditors petition" means a bankruptcy petition under section 264 (1)(a);
"criminal bankruptcy order" means an order under section 39(1) of the Powers of Criminal Courts Act 1973;
"debt" is to be constructed in accordance with section 382(3);
"the debtor" -
(a) in relation to a proposal for the purposes of Part VIII, means the individual making or intending to make that proposal, and
(b) in relation to a bankruptcy petition, means the individual to whom the petition relates;
"debtor's petition" means a bankruptcy petition presented by the debtor himself under section 264(1)(b);
"dwelling house" includes any building or part of a building which is occupied as a dwelling and any yard, garden, garage or outhouse belonging to the dwelling house and occupied with it;
"estate", in relation to a bankrupt is to be constructed in accordance with section 283 in Chapter II of Part IX;
"family", in relation to a bankrupt, means the persons (if any) who are living with him and are dependent on him;
"secured" and related expressions are to be constructed in accordance with section 383; and
"the trustee", in relation to a bankruptcy and the bankrupt, means the trustee of the bankrupt's estate.
(2) References in this Group of Parts to a person's affairs include his business, if any.

Regards

Richard