Houses and the Receiver, What to do?

[Bethany]

I think I am going to be bankrupt very shortly.. can't see how I can avoid it quite frankly - I have my own house (mortgaged) but even with the credit crunch, falling house prices I still have equity in the property - I have been told I will have to have a valuation done on the house if I go bankrupt - how do I protect my equity? - I have been told to get a poor valuation estimate - is this illegal, dodgy or is it just playing the game.

I've always been pretty honest, but I see/hear every day about people going bankrupt and still sitting in an obviously wealthy property, yet they do not lose their home - confused most certainly I am! What am I doing wrong? HELP!

[DaveH]

Not sure if I can answer this on the forum - once you are bankrupt, believe that all equity can be earmarked for creditors so any dodgy or alternative actions will be out of sight of the receiver.

post an addy where you can be contacted and I mail direct.

[joanne wood]

An attempt to do something 'dodgy' really is not an option when thinking about going bankrupt. You literally hand over your financial life when declaring yourself insolvent. There will always be a paper trail relating to your bank details and financial affairs. All paperwork is taken over by the Official Receiver, including any court battles you may have underway. You will also have to provide two separate house valuations.

The next explanation is long winded so stay with me.

Firstly, if you have equity in your house and it is considerable then sell up, pay your debts and start again. If you declare yourself bankrupt the Official Receiver will only make you do the same, with more charges and a bankrupt stamp which will last for life. But the bleak forecast for the housing market may bring some concern - you equity may already have diminished.

If you have very little equity in your property this is how it works.

Scenario one:
Husband and wife both declare themselves bankrupt.
Nil or negative equity in the house – You will be able to buy back your property from the Official Receiver after one year for cost of approximately £213 (Fee £211 and a nominal sum of £1 each) – yes, this sounds fantastic but the fact you have nil equity means you are probably mortgaged up to the eyeballs and will struggle to pay the monthly repayments– outcome you may have to sell your property anyway. Try not to have the property repossessed.

Scenario two:
Only one partner goes bankrupt.
Only half of the equity, in the property, belonging to the debtor, can be taken by the Official Receiver, although he can force a house sale to retrieve the bankrupts share. The partner will be given the opportunity to buy back their bankrupt partners half or a third party (family or friend) can do so if need rather than sell the property. Note: there will be additional costs added for solicitors and redemption fees in most cases.

Scenario three:
Both parties go bankrupt and a third party steps in to purchase all equity.

Note that the Official Receiver not only takes into account the equity in the property but additional legal costs and redemption penalties incurred if the mortgage has to be redeemed prematurely. Also any missed mortgage payments will be taken into account. It soon adds up. The OR will only force the sale of the property if there is enough equity for your creditors.

So you see, many hang on to their properties. Trying to buy back a partners share is still cheaper than starting on the mortgaged ladder from scratch. Buying a property nowadays requires a much larger deposit so, an attempt to buy back your share of the home you have already invested much of your time, love and money is a better alternative.

If you equity is considerable and you are unable to raise the funds to pay your debts, by way of selling off endowment policies and so forth then sell the property immediately.
You do not want anyone else making you bankrupt. You can be made bankrupt “in your absence.” This often happens to people who stick their head in the sand and try to ignore the financial turmoil around them, eg stuffing all unopened bills in the drawer.
Do not let that happen. Take control.

Yes, bankruptcy lasts approx six years on records. But most forms ask ‘Have you EVER been bankrupt?’ You see it stays with you forever.

I hope this answers your question Bethany. If anyone else has some insight into this subject please log on as it is one of the most frequently asked questions on most debt websites.

All information is valuable.

[celticman]

Hello! Well firstly I would like to thank the originators of this site for endeavoring to make this subject more human!

I feel it might be the thing to do 'go bankrupt' as i have 50k of personal debt, still no job after 9 months. i have managed to keep my mortgage payments going via lodgers)(so that is in order.
I hope to be employeed at something soon but it will not be at my previous high sssalary rate anymore.
I am 55yrs old

There is very little equity in the house maybe £5k probaly nothing if a forced sale occured. i am single and have a young child to support My wife left me (7 months ago she is not the mother).
Any way i want and really need a home I won't get another mortgage. rents are more here than the cost of my current payments. and rent credit checking wont look good for me anyway.. so can i keep my home.
wil the reciever let me buy back the beneficial interest from him is that definate if there is low value left after the mortgage is considered.
I am worried about being homeless.

i have heard some place that it can take three years after you have been bankrupt that you might have to sell the home.
I do I prove the true value of my home to the reciever anywayas estae agents all say different values to get the bussines.

Can you help mne please
Stenk you
Steve

[joanne wood]

Hello Steve

If bankruptcy really is the last option for you then the fact that you only have £5,000 equity in your property is a plus as far as I am concerned. It is highly unlikely that the Official Receiver will attempt to recover this sum as the you still have to take into account solicitors fees and any mortgage arrears. This would then take you into nil equity. So if you do have £5k you will probably be asked if you would like to buy back your interest in the property. As you have pointed out renting will probably cost considerably more. Just make sure that you can meet the mortgage payments and ask yourself is this enormous mortgage worth fighting for. Remember house prices are still falling. Although, we have been forced to sell up and the cost of renting is ridiculously high. After 18 months handing money over to my landlord I am beginning to feel a little peeved. We are desperatley looking for somewhere to live and are now faced with the problem of trying to get a mortgage. It is all very frustrating.

I wish you well Steve and hope what ever decision you make it the right one for you. Please take the free advice from as many organisations as you can regarding the particular issue. And remember if the Official Receiver offers you the chance to buy back your interest in the property (which normally occurs after the 12 month bankruptcy restriction) it will have to be paid in one lump and at the time I lodged my bankruptcy petition in 2006 the time limit to pay that sum was 18 months. The sooner you pay it the better because if house prices do rise again (although I can't see it realistically) then the cost to buy your property will also increase. Please ask all these questions when seeking guidance from financial advisors. Good luck and please let us know how it all goes. Any advice or interesting facts that you discover on the way - let us all know
All the best!