Discussions on life after your bankruptcy discharge.

Moderators: TalbotWoods, JaneClack

By loobyloo
#312973 Hi folks

I would be really grateful for some advice in regard to a buy to let mortgage I have with the West Bromwich Building Society, which was inculded in my bankruptcy in 2010, but was deemed to be in negative equity, so the trustee had no interest.

Prior to my bankruptcy, I owned 2 properties, one which I rented out. However, the tenant did a runner and the property was damaged and needed work if I was to get a new tenant. At the time, I was ill, unable to work so my mother helped out by, paying for the refurb, new radiator and new carpets.

This was in 2008 at the start of the recession, so in their endeavour to relieve themselves of their higher risk loans, they kept their interest rates around 5.6%, when the base rate was only .5%. Rents had fallen drastically in our area due to turbulent market conditions, so obtaining a tenant at previous rental yields, was proving very difficult. I took advice from a number of agents, who all told me I would have to reduce the rent if I were to find a tenant.

I found a tenant ready to move in, but she had a budget below the advertised rent, but in line with current market prices. So I explained the situation and tried to request some form of help from the West Brom, ie reduce the interest rate on my account so the monthly repayments could be covered by the rental income. They point blank refused, as they were hoping this would encourage borrowers to move their buy to let facility to another lender. Being ill and unable to work meant this wasn't possible for me.

So despite having refurbished the house, having a tenant ready to move in, they put the house into receivership and it would stand empty for almost a year, accruing monthly charges. They eventually placed a tenant, for £275 per month according to my statements, yet I had asked them to reduce the mortgage such that I could have placed a tenant at £375 per month before they instructed a receiver.

Sorry for the ramble, but I suppose I'm trying to demonstrate just how unreasonable they have been, despite my request for help and fully disclosing my situation.

On the morning I was due in court for my bankruptcy hearing in 2010, I received a county court summons from West Brom's solicitor for the full mortgage amount, plus their accrued fees, amounting to £83,000! I emailed the solicitor the same afternoon with my bankruptcy reference.

The house has been left empty more than it's been occupied. In the times it has been tenanted, occupiers have all been more than unsavoury, causing nothing but problems with the neighbours. However, due to the house being unoccupied for so long, the charges and arrears have stacked up so the outstanding amount is now in the region of £112,000, but property values have dropped substantially and the receiver has just advised me that the house is to be placed on the market for £59,950.

This leaves a massive shortfall and this is where I am panicking now, as I seem to be receiving conflicting advice / information.

The trustee handling the account told me in 2010, that as far as he was concerned any shortfall should go into the bankruptcy, yet the West Brom recently responded to my complaint in regard to the handling of the matter, refusing to correspond with the trustee, informing me that I was liable for the mortgage, so would only correspond with me.

I am still not in a position to work and have no income other than DLA, so am really worried that I will end up going through the whole bankruptcy nightmare again.

Apologies for the protracted explanation of the situation, but I'd br really grateful to know where I stand on this. Was the trustee correct in his assumption that the shortfall would go into the bankruptcy even though it was back in 2010, or am I going to be personally liable for the shortfall following a sale?

Thanks for reading and I apologize if its sent the proverbial glass eye to sleep!

Here’s hoping with fingers and toes crossed!
Annie
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By JaneClack
#312993 Unless you signed an agreement with the West Bromwich agreeing to survivsal of a shortfall, then the shortfall goes into the bankruptcy when the property is sold. I will get chapter and verse on this for you.
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By JaneClack
#313013 Have now spoken to a mortgage expert and he is confused by the content of the email - he assumes you were renting out during the bankruptcy and as the OR had said he was not interested in it, then as you continued paying it would now be down to you.

I read it as you had no tenant and the property was included in the bankruptcy as you knew you could not afford it and so handed back the keys.

Did you, in fact, stop paying the mortgage and looking for a tenant when you went bankrupt as if so this certainly does go into the bankruptcy.

However, if the OR released you from this (which is extremely unlikely at the beginning of a bankruptcy) and you continued to pay the mortgage when you could and sporadically got rent from tenants then it would be different - although I cannot see the OR letting what was potentially an investment accrue by letting you keep it.
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By TalbotWoods
#313033 Can I ask a simple question, do you have in writing from the Official Receiver a letter stating that they have formally declared having 'no interest' in BOTH properties and that they have handed ownership back to you.

The reason I ask is as Sarah has said this is highly unusual, but then the OR has up to three years to decide what they are going to do with the property, and there is consequently a HUGE difference between having No Interest at present and having No Interest and returning the ownership, which normally they are not allowed to do until 2 3/4 year point anyway.

Tim
By loobyloo
#313163 Hi Tim

Sorry for the late response. Not been too well.

And apologies if my ramble was a tad confusing. I was off on one, as happens when I discuss the West Brom.

A quick summary of events as follows:-

Nov 08 - Unable to work any longer due to illness.

April 09 - Tenant of buy to let absconded with rental arrears and considerable damage to house.

May /June 09 - Stopped direct debit due to lack of funds, but was still repairing and renovating property.

June 09 - requested assistance from West Brom in regard to interest rate/ mortgage holiday due to circumstances, but refused.

Oct 09- Buy to let House still unoccupied and taken into receivership on instruction of West Brom. Locks changed in my absence.

Jan 10- Declared Bankrupt

May 10 - Trustee declared interest in my home and informed me of his "Agents Valuation, which was way over the actual value, thus appearing to have some equity in the property.

I gathered my comparable evidence, including variances from land registry, 3 independent agents appraisals and wrote a full report as I would have when working.
As a former valuer of commercial property, I was curious as to where the trustee obtained his valuation, as if it were a desktop valuation, then this could not take into account the anomalies associated with my home. Much smaller than hypothetical semi detached in our area, only 1 parking space, considerable damage to property and garden by former tenant. ( before I became ill, I had previously rented my home for a period whilst living else where, but appear to have bad luck with tenants in both houses.)

July 10- Discharged from Bankruptcy.

Sept 11 – Trustee completed administration of my estate.

Oct 11 – Trustee sends “final Receipts and Payments Account” for the court, in he states “it was clear there was no equity available. Accordingly, the trustee relinquished his interest and returned the property to the debtor. It also states that I was sole owner of a tenanted property (it wasn’t tenanted at the time of receivership or bankruptcy) but the morgagee had appointed an LPA receiver to deal with the sale of the property.

Nov 11- My home - Trustee writes dispute of his valuation. Tells me his “Agents” valuations were actually obtained from “Mouseprice” online “valuations”. He also advises me that in the light of the “circumstances” I should instruct a solicitor to transfer the house I live in back to me, as there was insufficient equity to warrant a sale. I can only assume the “circumstances” being that I produced and provided a full valuation as would have been carried out within my former profession. This isn’t the issue really, the decision has been made to transfer my home back to me. However, I did have the legal work carried out by a friend, but the stumbling block came when he said the land registry needed £200 for the transaction to be completed. I just don’t have this kind of money, so this matter actually is a problem or could be and I don’t know how to resolve it at the moment. I’m not sure how thing stand with the OR, once the Trustee has told me to transfer back.
Really not sure of the situation here. Can they change their mind and declare an interest at a later date?

The buy to let house - Trustee also advised me that as the buy to let house is in the hands of a LPA receiver, it will most likely be sold at some point in the future.

Hope putting it into chronological order throws some clarity on the situation.

And in answer to your questions,

Yes I do have it in writing from the Trustee, where by he relinquishes their interest. This is also stated in the “final Receipts and Payments Account” for the court.

No, the property wasn’t tenanted before the bankruptcy and

Yes, I had already stopped paying for the mortgage in May 09 and placed in receivership Oct 09.

To my knowledge the house stood empty for a number of months, which at the time was immensely frustrating, as I was informed the Receiver would take power of the property and would be looking to secure a tenant as soon as possible. I was powerless to intervene, but could have had a tenant months previous had the West Brom acted in a reasonable manner, in line with government directives.

Hope to hear back soon and got my fingers crossed!

Thank you so much.

Regards

Annie
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By TalbotWoods
#313183 Thanks Annie

Going of to chat with my tame OR, but Sarah may get back to you if she beats me to the answer.

Tim
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By TalbotWoods
#313843 Hi Annie

I've heard back from my contact in the Insolvency Service, and there are a couple of points that need emphasising.



If you declared that you wanted to hand over the Buy to Let in the bankruptcy, you can hand the keys back to the lender and any shortfall and associated costs will go into the bankruptcy, just make sure you dont sign anything saying you will be responsible for any subsequent shortfall.

If so, then at this stage STOP paying any mortgage if you are doing so, STOP paying any outgoings, (except council tax), etc.

My contact doesn't understand the building society. This is clearly a bankruptcy debt and, unless you re-acknowledge the debt (which you clearly shouldn't as there is no benefit), they can't see any issue. Obviously the Building Societies view may be different and they may pursue through the courts but my contact can't see it surviving a robust defence.

So bottom line is - don't panic - walk away - stick to your guns that any shortfall is in the bankruptcy- refuse to discuss with them as it's a matter for the trustee (try them at their own game), other than asking for chapter and verse about why they think s285(3) and 291 doesn't apply to them, as this is contrary to the information provided by the insolvency service.

Next step on your part should be to go back to your OR telling them you are about to return the property to the Building Society, and that the shortfall will be a bankruptcy debt, especially as you are not longer going to pay the mortgage on that property and it will be subsequently repossessed by the Building Society. Also tell the BS you are doing this and let them know you are happy to voluntarily return the property (just make sure you REFUSE to sign any shortfall agreement as that is legally a bankruptcy debt so you cant)

The other point being if you didn't declare you wanted to hand the keys over, go back to the OR and tell them you are going to.

Please note that none of this reopens your bankruptcy, it is now just behind the mills stuff

Hope this makes sense

Tim
By loobyloo
#313943 Hi Tim

Thanks for that, but I effectively don't have the keys any more for the buy to let house.

Not sure if you saw my last response to you, but I stopped paying the mortgage for this house back in May 2009 and it was taken into receivership in Oct 2009. So effectively I have no access to the property and the receiver has taken over liabilities, including insuring the property, which is then added to the outstanding balance of the mortgage.

The council tax office have been sending bills whilst the property has been vacant, but for a nil amount, referring to a bankrupty exemption.

As its already in the hands of a receiver, do I still need to voluntarily hand the property back, as its already in their control?

And yes the buy to let mortgage was listed in my statement of affairs, but already in the hands of the receiver by the time I was declared bankrupt in Jan 10.

Sorry to be a pain.

Thanks for your help

Annie
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By JaneClack
#314093 This is quite simple from the time line given - it is included in the bankruptcy and as it had already been repossessed (I do not understand why it would be receivership?) when you went bankrupt the OR had to put it in the bankruptcy UNLESS:

When the lenders sells, they have sent a document to the client asking them to sign and return it and it has been signed -

Don’t sign it

This is a deed of acknowledgement

If its signed the debt re-activates post bankruptcy

If you have not signed anything like this the debt is within the bankruptcy - the OR/Trustee in the UK could not just wipe his hands of a debt as the house had already gone.

I think you need to speak to a legal advisor here as certain things do not seem possible.
By loobyloo
#314553 Hi there

I have checked through all my West Brom docs and thankfully it looks like I haven't signed any Deed of Acknowlegement.

I have no idea why it went to a receiver rather than repossession. I assume they still hoped to recover the full amount owed on the mortgage, as I received a County Court Summons on the morning I was to be declared Bankrupt.

Their solicitor had submitted a claim against me for the full amount owing at the time, which was in excess of £83,000. I messaged the solicitor advising him of my bankruptcy reference and never heard from him again.

Am now a little concerned regarding your last comment :-
"I think you need to speak to a legal advisor here as certain things do not seem possible."

Soo would be really grateful if you could elaborate as to what you don't think is possible please?

Thanks ever so much.

A
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By JaneClack
#314563 It is so very odd for an OR to say they are not interested in a property - which is not your former home so not just three years to chase for any equity in it - which had no equity and which had been taken back by the lender so you were not paying for it.

It was a debt in the bankruptcy even though it had not been sold at this point - take it from me this happens a lot with buy to lets and former homes that people have just moved out of.. so you should have nothing more to pay as you did not sign a deed of acknowledgement.

It just does not stack up loobyloo which is why you need professional legal advice. We cannot provide this here I am afraid.
By loobyloo
#314603 Thanks for getting back to me.

The trustee stated that as the property was in negative equity, he had no interest and as it was already with a LPA receiver, it would probably be sold.

I've just found a copy of that letter (I'd managed to slip it into the wrong folder) and the Trustee does state that I should instruct a solicitor to transfer my home back to me, but then follows on stating that the building society lending on the buy to let property have already appointed an LPA receiver, who will collect any rent and he assumes the property will eventually be sold.

His closing sentence in regard to the matter states As a loss is likely from the above, it will only be a claim in your Bankruptcy and not a claim against you in your current position.

In his "Final Receipts and Payments Account", under "REALISATIONS" - "Interest in Property", he states:-
The debtor was also the sole owner of a tenanted property at ................., But the Mortgagee (West Brom) had appointed an LPA Receiver to deal with the sale of the property. It is anticipated that upon completion of a sale, a substantial shortfall will be suffered by the mortgagee."

Does this add any clarity, or is it all still looking awry?

Cheers
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By TalbotWoods
#314623 Hi Annie

Sit back and enjoy this:

The OR handed it back to you to hold onto until it was repossessed, otherwise it would be an immediate cost to the OR, and he would be liable for insurances, CT, etc. The Government dont like the ORs incurring addtional costs at their expense!

Apparently this is happening more and more often with Buy to Lets when included in bankruptcy, where they are in Negative Equity.

Once repossessed ALL the shortfall then falls into the bankruptcy, and as long as you haven't signed you life away the whole shortfall is then a bankruptcy debt. And from what you have said you haven't.

The Building Society is not playing the game, because it will show as a massive bad debt, rather than a shortfall. They prefer a mortgage short fall of a couple of £2K rather than a whole mortgage loss of a LOT of 10's of £K!

It is ALL down to we dont want to bare the cost of it, so lets play ping pong!

Want to speed it up, as suggested before do a voluntary repossession, hand the keys into the Building Society, with a letter of your intent, AND GET THEM TO SIGN FOR THE KEYS AND LETTER!

Then it is purely a bankruptcy debt.

Tim
By loobyloo
#314653 Thanks for that Tim.

I don't actually own the keys, as the Receiver changed the locks upon his appointment, so I can't physically hand them back.

I was under the impression that once in receivership, I wasn't in a position to ask them to repossess, as they effectively already have by appointing the receiver, who withdrew all my access to the house.

Sorry if I'm sounding a tad thick on this, but

a/ can I still tell them to repossess the house when its in receivership and I don't have any rights of access,

And

b/ if I could and did tell them to repossess, would this not have even more of an adverse effect on my credit file than a shortfall after a sale???
The fees mortgage and fees stack up as:-
£82,000 Mortgage
£31,000 Costs and fees
£113,000 Total

The Receiver has now placed the property on the market at £59,950, so I'm anticipating a shortfall in excess of 50% of the accumulated monies owed.

I thought from what the Trustee said, this matter was all sorted and shouldn't be of any concern now, as the receiver would handle the sale and the debt would be within the bankruptcy. He made no mention of telling them to repossess.

Am a little confused and a tad worried. - Hopefully unduly!

Cheers