Giving the keys back & Mortgages

[wen]

Our house has very little equity in it, but having lost our business, the mortgage payments on our house are way too much for us to handle, and we are set to hand the keys to either the OR (when we go bankrupt) or to the Mortage company.

Out of interest, is it better to give them to the OR and tell them to take the house off us, or send them back to the mortgage company and let them sort it? Are we about to totally black-list ourselves and screw us out of a future mortgage, 5/10years down the road by giving the keys back, rather than waiting for the OR to ask us?

[Adam Davies]

Hi
The OR will normally allow you upto a year before forcing a sale after bankruprcy,however the mortgage company will normally start a possesion order after three missed payments.
Other people on the forum have stated that it is better to secure your new rented property before declaring bankruptcy and to then move out and hand your keys back to the mortgage company and then declare bankruptcy
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[MelanieGiles]

That would seem a sensible order of events.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[wen]

Andy, we have already found somewhere to rent, have been approved and are moving next week.

While I agree with what you've said, the only other little fly in the ointment is that we have a secure loan on the property by Welcome Finance. Would giving the keys back to the Mortgage company lead to the Official Receiver seeing this as "disposing of assets irresponsibly", seeing as there is another party involved to be paid by the proceeds? There is little to no equity left in the property, and surely the mortgage company would only care about getting the price for the mortgage rather than what Welcome Finance need too...?

[Adam Davies]

Hi
No
You are not disposing of the assets irresponsibly.
Let the mortgage company and Welcome fight it out,your mortgage company has first charge and will get the first bite of the cash from the sale,Welcome will get whatever is left and the balance will form an unsecured debt and will fall into your bankruptcy
When you move next week,hand your keys back and then declare bankruptcy as soon as you can
Regards


Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[MelanieGiles]

I would wait until you have been made bankrupt, and then seek advice from the Official Receiver.

Regards, Melanie Giles, Insolvency Practitioner for over 20 years.

To have me propose an IVA for you, please visit:
http://www.melaniegiles.com/ivaEnquiry.asp

See customer feedback at:
http://www.iva.com/iva_companies/IVA_Advice_Bureau.asp

[ray_a]

It would be better to talk to the OR and then write to your mortgage lender requesting where they would like the keys to be sent!

Is there any way that you could still sale the property yourself because you will still be charged by your mortgage lender for disposing the property?

[chris.g]

We are in the same predicament. We are moving out into rented accomodation, hopefully should be in by the end of the month and plan on going bankrupt before the end of the year. As we will be responsible for the house that we leave we are not sure what to do. Don't like the idea of the house standing empty while it's still technically ours.

Learning as I go along and getting wiser all the time!!!

[wen]

Ray, in answer to your question, as we are tied into a fixed rate deal, we would have to pay the best part of £15,000 early repayment fees if we were to sell, and as the equity wouldn't cover this after the loan as well, and the state of the housing market and the fact we just cannot afford the mortgage anymore, then selling in my opinion is not an option.

What do you mean by being "charged for disposing the property" ? We are going bankrupt, so surely any charges the mortgage company wanted to charge us would be written off anyway, or were you referring to something else?

[Adam Davies]

Hi
All costs and fees will be covered by your bankruptcy.
When do you anticipate filing for bankruptcy ?
Regards

Andy Davie
IVA.co.uk Spokesperson

About me:
http://www.iva.co.uk/andy_davie_profile.asp

IVA Helpline: 0800 197 4838
http://www.iva.co.uk/iva_helpline.asp

[wen]

We're in the process of getting the money together for it, so probably filing everything at the start of 2008.

[JulianSampson]

Morning

There are few issues raised here so hopefully I can help with some....

1. Welcome (who I tend to have little pity for generally) will get their share in the equity directly from your first Lender. Case law requires that Lender to obtain full (or as near as possible) market value as they are deemed to have a duty of care towards both Welcome and yourself in doing so.

2. any charges (such as in the disposal of the property) will be charged back to your mortgage account so Andy is slightly off here. They are not unsecured charges as they relate specifically to enforcing the security. If you get bored your mortgage conditions should confirm this for you.

3. talk to your Lender about your £15k ERC as many will waive this entirely on a voluntary possession. You can also negotiate a F&F amount with them to take into account the saved fees and time in enforcing their security.

4. I disagree that selling is not an option. If you are in a negative equity situation then the mortgage and secured lenders will have to take whatever is available. They have very specific timelines within which to reclaim their shortfall from you- unfortunately it is 6 years-but if you declare yourself bankrupt post sale then it is likely that they will w/o- I have very rarely seen a lender prove in a bankruptcy (although I would be interested to be proved otherwise)

Kind regards

Julian Sampson
Solicitor
Wright & Wright LLP
www.wrightandwright.com
See my article in Clean Slate magazine

[Andrew Graveson]

Hi Julian,

I thought the period to collect a mortgage shortfall was 12 years rather than the usual 6 years for other types of debts? Am I confusing this with another issue (statute of limitations)?

Would be good if you could clarify for me as it does come up from time to time.

Andrew Graveson
Mortgage Broker & Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk

[JulianSampson]

Ooh lovely question and one which I can give a lawyerly answer to..... it depends!

There is indeed a 12 year period but, with the law being the law, there is a general contradiction that recovery under contract is time barred at 6 years. The lenders currently, and successfully, argue that they have an exception as the mortgage is recoverable under deed and should be the full 12. In truth each one will turn on its own facts but a simple rule of thumb would be 12 years for capital arrears and 6 years for interest and charges. The time runs from when the right to receive money was set- a lender argues this is when the shortfall occurs whereas the court argues this runs from when the demand for repayment is sent.

And an interest only mortgage is treated identically to a repayment notwithstanding there is no covenant to repay a principal sum....

Kind regards

Julian Sampson
Solicitor
Wright & Wright LLP
www.wrightandwright.com
See my article in Clean Slate magazine

[wen]

2. any charges (such as in the disposal of the property) will be charged back to your mortgage account so Andy is slightly off here. They are not unsecured charges as they relate specifically to enforcing the security. If you get bored your mortgage conditions should confirm this for you.

4. I disagree that selling is not an option. If you are in a negative equity situation then the mortgage and secured lenders will have to take whatever is available. They have very specific timelines within which to reclaim their shortfall from you- unfortunately it is 6 years-but if you declare yourself bankrupt post sale then it is likely that they will w/o- I have very rarely seen a lender prove in a bankruptcy (although I would be interested to be proved otherwise)

After reading all that i'm a bit worried now. To be clear, if I was to go BR and give the keys to the OR, could the mortgage company come after me within 6 years to claim any shortfalls??

I take your point about selling, the only problem is that we can no longer afford the mortgage, so in effect we have 3 months until they would start repossession proceedings. Also we owe a vast amount to Bank of Scotland due to our failed business, and already getting threatening noises from them. While I would like to do the "right thing" and not out to screw our mortgage company over, i'm just not sure I have the energy left to try and sell.

Not knowing how charges work when you sell a house, but surely if the mortgage company don't get what they are owed, they wouldn't lift their charge would they??