BR - Gamble or Rent

[vad921]

Hi all,

No doubt this is the first of many posts re BR!!

We have so much negative equity that the adviser I spoke to said that it could be that neither the mortgage provider or First Plus would want to sell it because of huge losses. It may well be in their interest to want to hold the house for a few years for the value to increase. Where would we sit if this was to happen. We certainly have no intention to pay First Plus loan if we go BR as this is what had caused the situation in the first place. Should we gamble and stay put and see what happens or should we begin looking for rental accom now? I understand that renting can be difficult after BR because of the need for a credit rating so we really would need to sort it now, before BR I guess. We would have to default on the mortgage/First Plus in order to cover the rental and deposit + BR charge but I understand from various posts elsewhere this is not frowned upon by the OR.

The other question is around rental cost. If we move into rented after BR is the amount we can spend per month lower than if we sorted it before BR. I guess if we sorted in before BR then the rent is pretty much a fait accompli and the OR will accept it as part of our outgoings, or would he/she?

The cost of rental does concern me and what the OR may say.

Here you are looking at a minimum £600 but closer to £900 per month as the flooding of last year has massively increased demand for rental accom and is still having a major effect on prices now.

[MelanieGiles]

It is difficult to advise you without the full facts, or details of your current and future income and expenditure.

If you have no intention of paying the secured loan after bankruptcy, then after three months missed payments they are likely to commence possession proceedings against you.

Have you worked out a future budget for when you do move into rented - and would this then leave you with disposable income to fund either an IVA or a DMP?

[Adam Davies]

Hi
Other forum members have advocated finding a rental property prior to bankruptcy rather than after
Regards

[chris.g]

Hiya, although we were advised that we would probably be allowed to live in our mortgaged house for around 12 mths after BR, we decided that, it would be better to move sooner.
Try renting direct with a landlord as there'll be no admin charges etc that there will be for a letting agent, as well as the credit checks. I think honesty is the best policy in telling the landlord, better to find out he doesn't want you as a tenant before you move instead of after you have settled in.
Depending on what you are paying out for you mortgage and secured loan, you might find that your rent will be covered by missing these, as Melanie said you should have 3 months before they start any proceedings against you. By the time you file, you should have a good idea of your new expenditure is. As far as I'm aware, the OR won't have a problem with cost of rent unless it is excessive.
I had nightmares before we found our new home, thinking we would end up in a dingy, dark hovel or out on the streets. It was such a relief when we signed the tenancy agreement and I was in a better frame of mind to deal with everything else that was happening.
Good luck, xx

[Reviva UK]

Hi vad921

difficult to recommend as we don't know all the facts but I would really recommnd that if B is the right solution it is worth planning the timeframes carefully.

definately much easier to rent before you go B as the credit history is not so bad PLUS you would have X months rent as deposit.

If you haven't missed any mortgage payments yet why not get a mortgage statement - this may give some confidence to a landlord / agent that you can afford the rent over a period of time.

You need to plan when you will go B, prepare new bank accounts at the right time so you don't get stuck with no cash at the end of the month, find a new home, save for deposit, move out etc etc etc .

To get it right is is a small military operation. so get a blank piece op paper and work out what needs to be done when and you will find it goes a lot smoother.

Hope it helps

Paul

[vad921]

It is difficult to advise you without the full facts, or details of your current and future income and expenditure.

If you have no intention of paying the secured loan after bankruptcy, then after three months missed payments they are likely to commence possession proceedings against you.

Have you worked out a future budget for when you do move into rented - and would this then leave you with disposable income to fund either an IVA or a DMP?

Thanks all.

Melanie, we would only not pay the F+ loan if we went bankrupt. It seems strange to go through BR and leave the biggest part of the debt namely the F+Loan.

The reason I ask is that the IVA Adviser indicated that neither party may be interested in forcing a sale because both would lose too much. He thought they may leave it for say 3 years for equity to build up. He wasn't clear with the implications for us though and whether we would need to continue paying the full F+ loan. Understandably there are a lot of unknowns. If there was a chance we could stay in the house then we would always prefer this. The IVA Adviser did mention that selling house and then renting lower would improve our income to mortgage ratio but he said in our particular case (level of debt), as an IVA adviser, our best option is BR. He mentioned needing an income to mortgage ration of 35-40. Do you think this may be a viable option.

I don't think we would need to default for three consecutive months on the mortgage or First Plus loan for the rent and BR cost. So they wouldn't start repossession, or would they?

My concern with renting first is that the OR may say we have rented too high and tell us to move again, to a cheaper place.

Renting can be expensive here due to the excess demand for property as a result of the flooding.

[vad921]

Hi vad921

difficult to recommend as we don't know all the facts but I would really recommnd that if B is the right solution it is worth planning the timeframes carefully.

definately much easier to rent before you go B as the credit history is not so bad PLUS you would have X months rent as deposit.

If you haven't missed any mortgage payments yet why not get a mortgage statement - this may give some confidence to a landlord / agent that you can afford the rent over a period of time.

You need to plan when you will go B, prepare new bank accounts at the right time so you don't get stuck with no cash at the end of the month, find a new home, save for deposit, move out etc etc etc .

To get it right is is a small military operation. so get a blank piece op paper and work out what needs to be done when and you will find it goes a lot smoother.

Hope it helps

Paul

I can provide any detail needed if it will help. We have a mortgage at £170k, unsecured loans of about £60k and a secured loan that is probably (best guess as First Plus don't give settlement figures over the phone) about £75k. It is shameful and embarrassing and difficult to talk to anyone about! Our joint income is £3800 pm.

[MelanieGiles]

I would definately take another opinion from an insolvency practitioner just so you can satisfy yourself about the options. It is quite possible to propose an IVA based upon a contingent liability together with your other debts, so long as you are left with sufficient disposable income to fund ongoing payments.