Debt advice regarding iva's/bankruptcy

Robflh

Hi Toon_Dave

I understand what you mean but if you declared yourself bankrupt, the OR would look at the property as being worth £85,000, with an outstanding mortgage of £61,000 and to him or her that would mean a potential £24,000 in equity. That would of course mean you could keep the house, if hell freezes over.

Personally, if I could get an IVA and the property signed over to me, I would pay the money for six years, be debt free and have a nice asset.

If I could not get the IVA and I had two free bedrooms, I would get a lodger or two. Depending on where you are and the size of the rooms, you could get £65 for a double room and £50 for a single, which would include bills but not the phone. You would need two fridge freezers and the rooms need to be furnished. Bed, wardrobe, chest of draws and pillows. They would provide their own bedding but not always.

It is not an easy thing to do but if it brings in the extra money you need and you can easily pay off the debts, you would still end up with the property.

Another option would be to rent the property but through an agent and move back home. A furnished three bedroom home could get you £500 to £600 per month and the tenant would pay for the utility bills and maybe the service charge.

Ask a couple of letting agents to come round and see what they think you could rent it for. You do not have to rent it out but it is nice to know how much and whether it is an option you could take.

fermi

Robflh wrote: »

I understand what you mean but if you declared yourself bankrupt, the OR would look at the property as being worth £85,000, with an outstanding mortgage of £61,000 and to him or her that would mean a potential £24,000 in equity. That would of course mean you could keep the house, if hell freezes over.

No. You misunderstand.

House = £85,000
Mortgage outstanding = £61,000
Secured loan = £21,000

Equity = £85,000 - £61,000 -£21,000 = £3,000 (at most, and probably less or negative.)

Robflh

Hi fermi

So a loan secured against a property would automatically be added to the mortgage if the owner filed for bankruptcy.

How much equity would there need to be for the house to be sold. £3,000 sounds a lot but that would only happen if someone offered the full asking price. If the house was auctioned instead of being put on the market, it might not even get that amount.

I have been reading What will happen to my home?. If someone bought the £3,000 he would be able to keep the house. If the other loan is secured against the house, the equity would be a big negative and he can keep the house. Have I got that right?

This may seem a silly question but once someone with no assets has filled for bankruptcy and they have been declared bankrupt. Are all the debts cancelled, mortgage, secured loans and so on.

fermi

Robflh wrote: »

So a loan secured against a property would automatically be added to the mortgage if the owner filed for bankruptcy.

It's not added to the mortgage, but the secured loan does act as an effective "charge" against the property. When a property is sold lenders with a charge/security against the property should be paid in order; i.e. mortgage company first, and then the holders of any charge/security in the order they were placed or became entitled to them.

Robflh wrote: »

How much equity would there need to be for the house to be sold. £3,000 sounds a lot but that would only happen if someone offered the full asking price. If the house was auctioned instead of being put on the market, it might not even get that amount.

Impossible to tell exactly, but if it's less that £1000 then they won't even consider it.

Sorry for more reading, but have a look at: http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter33/part1/part_1.htm

The OR has to look at it on a case by case basis, but they would only ever seek an order of sale if the amount of equity/interest that would be recovered makes it economic to do so and would result in a return to creditors.

Robflh wrote: »

I have been reading What will happen to my home?. If someone bought the £3,000 he would be able to keep the house.

Yes, as long as the mortgage company was happy (and most are if they are still being paid), and the payments on it are not unreasonable and you can afford them.

Robflh wrote: »

If the other loan is secured against the house, the equity would be a big negative and he can keep the house. Have I got that right?

He can if he can afford to service the debt, and the Official Receiver has no objections. However, it's unlikely that the OR would allow you to make very large payments on it.

If the house is sold after the bankruptcy, then any shortfall in the secured loans would be included in the bankruptcy. If only the bankrupt was liable for these then the shortfall would be written off, but if the secured loans were in joint names the other person would become liable for the shortfall on their own.

Robflh wrote: »

This may seem a silly question but once someone with no assets has filled for bankruptcy and they have been declared bankrupt. Are all the debts cancelled, mortgage, secured loans and so on.

Mortgage and other secured loans remain secured against the property. But if the property is sold/repossessed as a result any shortfall that the bankrupt would otherwise have been liable for is included in the bankruptcy.

As you can imagine, this is a frequently discussed topic on the bankruptcy board and causes endless confusion.

Robflh

Hi fermi

I am trying to work out if it would be better for Toon_Dave to file for bankruptcy or go for an IVA. I do not think he has enough money to make payments on the new total debt. Unless that is, he took in a lodger or two. In which case, he would be paying all the money back, even though he was not the one that ran up the debts.

Bankruptcy or an IVA will remove or reduce that debt. With an IVA he would be able to keep the house but if he can file for bankruptcy and keep the house, even if that means he still has to make payments for the mortgage and the loans secured against it, that maybe a better option.

I looked at http://www.insolvency.gov.uk/freedom...rt1/part_1.htm but reading is not my strong point and for me it is like trying to read a foreign language.

Ps. To service the debt. Does that mean make payments to them and if so does that mean normal payments or reduced payments.

Toon_Dave

hi all, thanks for all the advice. i have read all the posts since i last checked last night. your time is most appreciated.

With regards to the house it is valued at £85,000. However, mortgage outstanding is 61,000 + secured loan (2nd charge) is 21,000 so totalling £82,000 in total plus EA fees and solicitor fees are £2000. so assuming i can sell and get top price of £85,000 that would leave £1000 equity.

I am not sure if this would be able to be used during BR procedings or if i need to sell privately before BR. The reason i said assuming i can sell is that i am awaitin confirmation on another loan which the collection company have said has now secured a charge or vested interest in the property, this is £35,000 so if this is secured then there is a massive negative equity.

Therefore i think BR may be the best option. i am speaking to an IP tomorrow as well as the CCCS BR line as got confirmation email from them today to contact them. I will update you all as to how it goes and what they suggest.

i have started compiling my online SOA forms on the insolvency website in readiness last night.

on a slightly better note i have had a meeting with my HR manager today to discuss my current situation with regards to bankruptcy and IVA's affecting my position. There is nothing in my current contract which will be affected should i go BR and they have offered me all the support that i need and should i need time off to attend court etc then they are happy to sort this at short notice. That was a weight off my mind as i was slightly worried about the job situation but that is secure no matter what happens. I am currently off work taking some time to sort my debts etc as i have been ill with it all and my work place have been more supportive than i ever imagined they would have been.

Toon_Dave

hi Fermi

Mortgage and other secured loans remain secured against the property. But if the property is sold/repossessed as a result any shortfall that the bankrupt would otherwise have been liable for is included in the bankruptcy.

From your post above, what would be the best way to sort the sale? Do you think it is more advisable to sell before BR or after??

Or do i stop paying mortgage and therefore allow repossesion??

Im not sure what i am allowed to do prior to or after filling for BR.

i know you probably cant give too much advice and this specific area but thought i would ask the question anyway.

Cheers Again.
Dave.

fermi

Toon_Dave wrote: »

From your post above, what would be the best way to sort the sale? Do you think it is more advisable to sell before BR or after??

Personally, I would just hand the keys back to the mortgage company either before or after the BR.

It would then be up to them and the other charge holders to sort it out with the OR.

But professional advice on property is a MUST.

Toon_Dave

Hi Fermi,

that is what i was thinking, just chucking them the keys and saying here you go...lmao...if i stop paying mortgage and secured loan...what can they do if im already bankrupt!! But i will take legal advice and exactly what the best course of action is. As i said above i have a couple of calls to make tm, one to the IP recommended by the CAB and another call to the CCCS Bankruptcy section so i will update tm after my calls...

And i will tell you how far i have thrown my keys at them.

Thanks Again
Dave.

Robflh

Hi Toon_Dave

Your boat may have sprung a leak but that does not mean it will sink. So do not give up the house until you have too.

Do not default on the mortgage or any loans secured against the house. This would allow them to start proceeding against you and never ever just give the keys back.

You need to find out what happens to the mortgage and the loans secured against the house if you got an IVA. Does the IVA cover just the unsecured debts or unsecured and secured debts or does it cover all debts.

If you filed for bankruptcy and the OR did not sell the house, you need to find out what happens to the mortgage and the debts secured against it.

You can afford to pay the mortgage but not all the other debts, most of which are not even yours.

You seem to have already given up. I know you are finding it difficult to cope with all this but you need to hang in there until you have all the information and then when you have all the information you can make an informed decision.