My friend has a mortgage debt that she cannot service after a failed relatiionship. Her income is low and she has already moved out of the property and is living at her parents. Unable to sell the house which is now now in negative equity she is considering voluntary repossession and bankruptcy as the best option in the circumstances. Should she send the keys back first or stop paying and declare bankruptcy before doing so. She has few tangible assets and her income is low.
Just going by what you have said it sounds like she could go ahead with the BR - provided it is a sound idea what with all the other issues to do with it - and stop paying the mortgage now (if she has not already stopped paying it. If she hans in the keys she will still go on the repossessions register for 6 years but will avoid a ccj for eviction. By handing in the keys now it might speed up the sale of the property. any interest on the mortgage will still be added, however, if she hands in the keys, until the property is actually sold. If she is paying rent at her parents it might actually be an option to move back in to her house for a while, pay the BR fee of £495, go bankrupt (highlight the impending repossession on the BR form so that the OR will anticipate it), NOT make any mortgage payments from the date of the BR and wait for the mortgage company to evict her. The only difference between that and handing in the keys is she will end up with a ccj but thee ccj is trumped on the credit file by a BR and they are both on there 6 years. She could then move in with her parents in what may be up to 6 months before all the repossession wheels have turned. After all, as I stated above, she is still going to be held liable for interest by the mortgage company until it is sold so she might just as well live in the property.
N.B. It is critical to stop paying the mortgage as if she carries on paying the mortgage she could still be deemed liable for any mortgage shortfall arrears when the property is sold. It may sound strange but, unless someone is trying to keep their property they should stop paying the mortgage from the BR date. The last mortgage payment should be made BEFORE the BR date.
Hope this helps and a lot of it is from personal experience.
repossesion before bankruptcy ?
Posted - 10 October 2008 : 14:33:00
