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Starting Member

10 Posts

Posted - 28 March 2011 :  22:18:14  Show Profile  Reply with Quote

Briefly : I was on a DMP for 3.5 years which was actually increasing, so 12 month ago decided an IVA was best option, this has never been processed due to problems with Link owning over 40%of the debt. Last month i decided BR was only way out of the mess i was in. Anyway throughout the whole process i have been advised that as my home is in negative equity that i would not lose it. Ok major hurdle overcome, so me and the wife discussed it and thought well only option left lets do it, as long as we can keep the house. So today ive been to court, paid my money had the BR granted etc. Then this afternoon the OR calls and we have a brief discussion about how things will pan out, i ask about the house and my mortgage payments etc, she then tells me £1527 is excessive you may have to sell and rent !!!! OH NO nobody told us this. My issue now is firstly will this happen ? Secondly if so can i withdraw the BR and try something else ? My wife is distraught now and as we have 10 days till formal interviews with the OR it is going to be an horrendous time thinking about what is going to happen. What can we do ? For information the mortgage is £21600 with an £8000 redemption taking it to £224000, the last valuation 8 months ago had it at £190000-200000. Will they really force us to sell and rent ? What we thought was going to be the easiest step is now turning out to be possibly the worst possible scenario. Thanks in advance.

forum expert

2826 Posts

Posted - 28 March 2011 :  23:02:54  Show Profile  Reply with Quote
I think you need to be realistic about your outgoings

For instance what size is your family, do you need to be paying £1527pm for accomodation

here is the OR's guidance on the matter

31.7.84 Assessing mortgage payments
Mortgage re-payments may be extremely high where the bankrupt is in arrears with payments or has taken on a mortgage to the maximum extent of their income. Where the bankrupt is making the entire mortgage payment against a property which is jointly mortgaged, and no (or minimal) contributions are being made by third parties, the official receiver should take this into account when assessing the bankrupt’s capacity to make payments under an IPA/IPO.

A bankrupt who is making mortgage repayments is ensuring a home for him/herself and his/her family, but is also repaying a bankruptcy debt. Where the bankrupt continues to make high mortgage repayments this is likely to be at the expense of his/her unsecured creditors, and the official receiver should consider whether he/she should seek to disallow a fair share of the payments being made in respect of any joint liability. The official receiver should also investigate with the bankrupt the possibility of extending the repayment terms of the mortgage, thus reducing the amount to be paid on a monthly basis and increasing the amount of income available to be included in an IPA or IPO. Factors which should be considered include the possibility that renegotiating the terms of a mortgage (including payment holidays) and/or lengthening the mortgage period may give the lender an opportunity to make the bankrupt liable for any mortgage shortfall post bankruptcy.

The judgment in Malcolm v Official Receiver [1999] B.P.I.R. 97 [note 4] considers the possibility of obtaining an IPO against a bankrupt who may not have an obvious surplus of income over expenditure because the mortgage payments made by the bankrupt are excessive and/or the payments are being made by the bankrupt on behalf of himself/herself and one or more other persons with separate income(s), who might be expected to make some contribution towards the mortgage payment. Further information on the Malcolm case can be found at paragraph 31.7.86).

31.7.85 Pursuing IPAs/IPOs where mortgage payments appear excessive
Whilst the official receiver would not wish to make a bankrupt homeless through the pursuit of an IPA/IPO, he/she should continue to pursue an agreement to make income payments contributions, where the bankrupt has sufficient surplus income taking in to account his/her reasonable domestic needs and where mortgage payments appear excessive. Care should be taken when assessing outgoings to identify any liability for mortgage obligations in addition to the family home, e.g. if the bankrupt’s income is being used to supplement mortgage payments for properties owned with or by other family members such as partners, spouses, parents, in-laws or children. The official receiver should consider whether the subsidising of such payments gives the bankrupt an equitable interest in the relevant property. Usually such payments should be disallowed when considering the bankrupt’s expenditure and the mortgagee should be left to consider its position having regard to its security.

Where mortgage payments are considered excessive this may involve the official receiver in pursuing an income payments order, by seeking to disallow excessive mortgage payments, as in the case of Malcolm v Official Receiver [1999] BPIR 97 (see paragraph 31.7.86).

31.7.86 Malcolm v Official Receiver [1999] B.P.I.R. 97 – requirement to seek alternative rented accommodation
The case in April 1998 of Malcolm v Official Receiver [1999] B.P.I.R. 97(District Judge Mr Justice Rattee) [note 4] is the long-standing authority for the proposition that the official receiver may explore proposals to reduce payments by way of mortgage instalments, which may involve finding alternative accommodation, so that a bankrupt would be able to make significant payments for the benefit of his/her creditors. In this case the official receiver applied for an IPO, demonstrating in his application to the court that Mr Malcolm had sufficient surplus income after a reduction in his (excessive) mortgage outgoings, to make payments of £105 per month. At the initial hearing it was accepted that the bankrupt was unable to pay this amount until he found alternative accommodation, so the District Judge made an interim order for payments of £50 per month for a period of three months and ordered that the matter was to be reviewed before the court at the end of this period.

As the bankrupt had not found alternative accommodation so was not in a position to pay even the £50, Judge Rattee upheld an appeal against this order from Mr Malcolm, but only on the specific understanding that the matter was to be brought back before the court, and that at the later hearing, the bankrupt would have to provide carefully worked out proposals to reduce the mortgage instalment payments, which would involve finding alternative accommodation.

Where suitable (not necessarily equivalent) rented accommodation is available to the bankrupt in the same or similar area (having regard for the family’s domestic needs and circumstances), and is significantly cheaper than the cost of the mortgage payments claimed by the bankrupt, a view will need to be taken by the official receiver as to whether an amount equivalent to the rented accommodation is allowed rather than the total mortgage repayment amount claimed by the bankrupt.

31.7.87 Consideration of regional cost variations and rental deposits
Regional variations in the costs and availability of rented accommodation will need to be considered by the official receiver when calculating the reasonable domestic requirements of the bankrupt. As a result of the requirement to pay a deposit when entering a rental contract, it may be necessary to delay the commencement of an income payments agreement to enable the bankrupt to accumulate the necessary funds to make the deposit payment , this action in the long term being beneficial to the estate by increasing the funds available to be paid later under the IPA/IPO. However, any delay in commencement of the IPA/IPO must take in to account that an IPA has to be signed by the bankrupt and the official receiver or trustee prior to the date of discharge.

31.7.88 Other considerations relating to the removal of the bankrupt and his/her family to alternative accommodation

In considering whether alternative rented accommodation is suitable for the reasonable domestic needs of the bankrupt and his/her family, the stage a child has reached in his/her education (for example where he/she needs to remain at the same school to complete a significant exam year) or the care needs of a dependant (e.g. day care or respite care) will need to be considered by the official receiver. These matters should be taken into account when making any decisions regarding the flexibility of the bankrupt and his/her family in moving to alternative rented accommodation. It may also be necessary to delay collections under an IPA or agree a payment holiday (for example for 3 to 6 months) to allow the bankrupt to find alternative accommodation.

Official receivers should check with their local council for guidance as to the accommodation allowances considered when calculating eligibility for council accommodation or in relation to privately rented accommodation, using the Local Housing Allowance (LHA) to work out Housing Benefit entitlement. LHA is used to work out the Housing Benefit entitlement of tenants renting private sector accommodation in England and Wales and the guidelines used by the council relevant to the area in which the bankrupt lives may be of assistance to official receivers in calculating what the minimum accommodation requirements might be for a bankrupt and his/her family within a similar area to their current accommodation.
Access to the direct.gov website containing details of the LHA and contact details for various local council websites can be found at: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/On_a_low_income/DG_10018928

There is also guidance available as to the criteria used by councils and housing associations when assessing eligibility for council house accommodation at: http://www.direct.gov.uk/en/HomeAndCommunity/Councilandhousingassociationhomes/Councilhousing/Applying/DG_188706

Further information on the LHA and eligibility criteria can be found at:

31.7.89 Payments to additional secured creditors
Where there are additional secondary secured creditors the official receiver should take into account all payments to be made. Where there is no equity available to secondary charge holders, the official receiver should not include any payment to these creditors in an income payments calculation as there is no enforcement action that can be taken in respect of these debts as the asset is already fully charged.

31.7.90 Applying to court for an IPO where bankrupt disputes mortgage payment is excessive

If the official receiver’s income payments calculation, taking into account reasonable domestic expenditure but disallowing part of the mortgage repayments, suggests that the bankrupt has sufficient surplus to collect payments under an IPA but the bankrupt wishes to continue making excessive payments and/or payments on behalf of third parties without receiving any contribution from them, the official receiver may consider applying for an IPO rather than an IPA, following the judgment in Albert v Albert (A Bankrupt) (1996) BPIR 232 [note 5]. The official receiver must report the full facts to the court to allow the court to decide whether the bankrupt's claim that the expenditure is reasonable should be allowed.

31.7.91 Bankrupt to be encouraged to attend IPO hearing where mortgage payment disputed
Wherever possible the official receiver should encourage the bankrupt to attend the IPO application hearing, particularly where the effect of such an order might mean that the bankrupt can no longer meet the mortgage commitment, which may lead to the sale of the property. The bankrupt's attendance will allow the court to hear his/her views and possible proposals for dealing with the situation, which may include a voluntary sale of the property

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forum expert

United Kingdom
641 Posts

Posted - 28 March 2011 :  23:55:01  Show Profile  Reply with Quote
Hi harryboy,
welcome to the forum.
Unfortunately, debtinfo is correct in that one thing that used to be latched onto in I&E's were high or excessive mortgage payments as it could indicate mortgaging the property to the hilt, so there was no equity(not saying you did, but it happens) , especially at a time when mortgage interest payments are at an all time low. The key thing is in paragraph 31.7.84 in that you are repaying a bankruptcy debt, to the detriment of your creditors, plus having regard to your current property, what is the current rate for rental properties in your area similar to it?

Unfortunately, it is also highly unlikely that you would get the bankruptcy annulled(reversed). The only grounds for doing so are: pay all your unsecured liabilities in full, or show that the order shouldn't have been made.

Big Al
Insolvency examiner with the Insolvency service from April 2008 - July 2010.

If you need help completing SOA's(statement of affairs) or PIQ's(preliminary information questionnaire) if you've been declared bankrupt, or anything else and you're within 30 miles or so of Warrington, then please contact me via my contact details in the expert page for futher details"
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Richard P
Senior Member

United Kingdom
1701 Posts

Posted - 29 March 2011 :  09:58:32  Show Profile  Reply with Quote

Is the mortgage interest only or repayment ?

Is the mortgage high due to mulitple charges on the property ?

what is the size of your family

your house is worth 200K, in some parts of the UK that might get you a chicken shed in others a very large property

as big al states what is the price to rent a similar property in the area?

all is not lost, time scale could be anything up to three years.

Big Al and Debt info have provided the information that the OR will be looking at lots of questions, it is now for you to explain to the OR why the property is appropriate to you and your family needs.

Good Luck Richard,
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Starting Member

10 Posts

Posted - 29 March 2011 :  18:16:03  Show Profile  Reply with Quote
Hi Thanks for this info, the mortgage is repayment, we have two young children 2 and 4 and i have a 13 year old daughter from previous marriage. No charges on house etc, mortgage up to date. The debt i have is from 5-6 years ago. I have tried everything to avoid BR, if i had known i would lose house and have to rent i would have gone BR 5 years ago. The major problem i forsee is as we are in new build, standard 4 bed detached, the developer is struggling to sell other houses so has put them up for 6 monthly rents at £800 per month. Which is basically half my mortgage. My wife is now distraught at the thought of leaving our home, we would have to explain to her parents etc why we are doing it and she wants this to remain our horrible secret !! It is now turning into a nightmare for us, as i thought BR would be the end of all the hassle ive endured for last 5 years. The fact i put up with it all now seems totally pointless. Anyway thanks for the advice, hopefully the OR will show some compassion.
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Richard P
Senior Member

United Kingdom
1701 Posts

Posted - 30 March 2011 :  09:50:02  Show Profile  Reply with Quote
Hi Harry

good luck with the OR interview they wont make a decision re mortgage payments at the interview, but they will give you the option to give your side of why you should stay in the house.

all is not lost (at the moment),

i know it is too late in the day to say but others will read the thread so would like to use your space to say Bankruptcy is all about the planning, for anyone considering bankruptcy get your ducks in a line and if necessary run your scenario past one of the experts. once the Judge makes the order it is very hard to change things.

as said good luck with interview, prpare a response NOW for the interview so that when / if the question comes back about mortgage you have a written response ready


Good Luck Richard,
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Starting Member

10 Posts

Posted - 01 April 2011 :  15:39:42  Show Profile  Reply with Quote
Its looking promising with the house. I brought my interview forward and my OR has been fantastic up to now. It looks like i will keep the house and go back to interest only mortgage. I can cope with that for another 3 years. I will be paying a IPO, again looking like a figure i can cope with. So overall my outlook is better than it was 2 days ago.
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United Kingdom
4590 Posts

Posted - 01 April 2011 :  16:36:45  Show Profile  Reply with Quote
Great news Harry, glad it is going to work out for you,

Double, double toil and trouble;
Fire burn, and cauldron bubble.

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Senior Member

1159 Posts

Posted - 02 April 2011 :  12:49:15  Show Profile  Reply with Quote
If house prices go up it may benefit you being on an interest only mortgage.
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New Member

61 Posts

Posted - 03 April 2011 :  20:10:10  Show Profile  Reply with Quote
Sounds great news Harry, keep us posted. Thanks for sharing.

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forum expert

United Kingdom
641 Posts

Posted - 03 April 2011 :  22:43:31  Show Profile  Reply with Quote
Hi Harry,
sounds promising, if you go interest only at least it shows you're willing to co-operate, 3 years on an IPA is more promising than continuing to struggle in a DMP indefinitely, or an IVA for 5 years with management fees.

Big Al
Insolvency examiner with the Insolvency service from April 2008 - July 2010.

If you need help completing SOA's(statement of affairs) or PIQ's(preliminary information questionnaire) if you've been declared bankrupt, or anything else and you're within 30 miles or so of Warrington, then please contact me via my contact details in the expert page for futher details"
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Reviva UK
Advanced Member

United Kingdom
2452 Posts

Posted - 03 April 2011 :  23:43:17  Show Profile  Reply with Quote
There is also an argument that by pursuing an Income Payment Agreement in such cases the Official Receiver is actually going to make the bankruptcy debt larger.

i.e. by forcing you to leave the house you will have the house repossessed which will likely create a negative equity. This is potentially a preferential position AGAINST the secured lender and in favour of the unsecured bankruptcy creditors.

In addition in order to move you are likely to require 6 months rental in advance, moving costs of approximately £800 - £1000, in addition you may have some difficulty in transferring utility providers and possibly may need an advance deposit for these also.

I am not trying to be negative but simply trying to give you some ammunition for you to fight your corner.

You may want to ask if the OR would like to fund your rental deposit and moving costs.

what would happen if husband & wife were to temporarily split and one person live with friends / family? That would create a significant increase in expenditure ( 2 lots of accomodation / utility / food / fuel allowances etc )

there may well be solutions to your problem. I would suggest you speak to an expert for a chat.

Paul Johns
Bankruptcy Specialists
Reviva UK
08454 751 851

Real People ..... Real Debt Solutions
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forum expert

United Kingdom
3290 Posts

Posted - 04 April 2011 :  10:06:53  Show Profile  Reply with Quote
I hope thinks work out for you harryboy - please keep posting to let us know how you get on.

View my blog at http://skippy13.blogs.iva.co.uk/

Only when the last tree has died, the last river has been poisoned and the last fish has been caught will we realise that we cannot eat money.

Last IPA payment made on 28th June 2010 - it's over at last!
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Starting Member

10 Posts

Posted - 04 April 2011 :  22:08:04  Show Profile  Reply with Quote
Im certainly co-operating, ive done everything to try and pay this debt but to no avail. Nobody will touch me but hey ho. Bad news today having gone through the whole bank account change 4 years ago to basic i then built up my rating with the bank, ive not acquired any debt in last 5 years, today i was told i have to do it all again !!! Ahhh bloody pain in the jacksie. So my two debit accounts are to be closed, thankfully i kept my basic open. They certainly like to kick you when your on the floor.
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