Questions you have before making a decision to go Bankrupt and the Bankruptcy process

Moderators: TalbotWoods, JaneClack

By Dan Small
#212588 I'm about to file for bankruptcy voluntarily. Briefly, I have approx £40k of unsecured debt, but all in my name. My wife and I have a joint mortgage on a house. When I go bankrupt, we're hoping she can buy my share of the equity from the OR which I'm sure we can do (you might have seen my other posts lol).

A thought occurred to me. Our mortgage is with the same bank I owe a £25k unsecured personal loan to. When I go bankrupt, I'll be writing off that 25k loan, but the mortgage is still with the same bank that will hopefully be transferred to my wife when she buys my beneficial interest and carries on paying it.

What I'm concerned about is if the bank can stop her doing that? The only way I can see is if they say we took out a joint mortgage based on both our incomes, but now we're trying to sign it over to my wife who would never have gotten that mortgage on her own salary. Is this just me over-thinking something and they won't care as long as the mortgage is paid (we've never defaulted on any payments), or could they get funny about it (just for the sake of it perhaps) because I owe them £25k?

Thanks again, Dan
Last edited by Dan Small on Mon Apr 20, 2009 12:37 pm, edited 1 time in total.
By Crunchynut
#212593 check whether the loan is an 'all monies charge' which is likely as it will convert the secured loan to a secured one ( as an addition to your mortgage ) when you go bankrupt. Most additional loans since 2000 provided by your mortgage lender will be, however.

on the bright side, it will also reduce the amount of equity in the house and the BI you need to deal with.
By Dan Small
#212606 Sorry Crunchynut, I'm not sure I follow. If I'm reading what you've said correctly, the bank can effectively add the 25k UNSECURED loan to my joint mortgage with the wife? So my 124k mortgage becomes effectively 149k?

If they do that, they still can't take the house before allowing my wife to purchase the interest in it can they (which will now make it negative equity with absolutely no BI)?

Is it a way for them to get their loan back one way or another? If so, how can they do that when I took the personal loan out in my name only, but the mortgage is in mine and my wife's? Aren't they two separate products, that just happen to be from the same bank?

Do I just phone the bank and ask them if the loan is an "all monies charge"?

Sorry if the questions seem a bit dumb but I don't yet understand all the terminologies and if what you've said is right, I take my hat off to the bank cos that's a damn clever way of doing things.
Thanks, Dan
By Crunchynut
#212618 It's more complicated than that but in essence, yes.

If you default on the personal loan, provided by the same bank that holds your mortgage, the bank can add the unsecured debt to the secured debt ( securing it in the same way as via a charging order without needing to go through the same process ).

The main concern would be then you would be in negative equity and no bank in the world will lend you more than 100% of your property value so your wife would struggle substantially to raise the funds necessary to retain the house.

It's important to note, at this stage, that if you DIDN'T have the secured loan, as long as you maintain the mortgage and are able to get someone else to buy your Beneficial Interest ( your share of the equity in the property ) the Official Reciver DOESN'T reposess your house.

Depending how much you owe apart from the loan. it's worth looking at an alternative to bankruptcy if the personal loan makes up a large proportion of your overall debt.

You need to speak to a property lawyer about this ( aim for one that offers a free assessment, or try to get an appointment via the CAB although these seem to take a while ) as it could defeat the object of bankruptcy.
By Dan Small
#212628 Right, this seems to completely change things!!

I'm not at all clear on this bit. Could you please explain it for me as this could be really bad news?:

1) "The main concern would be then you would be in negative equity and no bank in the world will lend you more than 100% of your property value so your wife would struggle substantially to raise the funds necessary to retain the house."

My understanding was that if I go bankrupt, because I have a joint mortgage with my wife, if there is any equity in the house, she can buy my share for half the cost of that equity. If there's no equity, she should be able to buy my share for £1. If the bank add the unsecured loan to the mortgage, putting us in negative equity, she buys my share for £1, but she now has a mortgage for £149k, rather than £124k, on a house only worth £130k. Does this matter because she effectively has to apply for a new mortgage (hence your comment above)? If that's the case, how can anyone buy the BI for £1 if the house is in negativy equity? Surely the bank would rather my wife keep paying a mortgage for £149k as that way they get all their money? Otherwise, if they reposses, they'll only get £130k at best? Sorry to keep on about this but my priority is to keep the house if possible. Thanks again, Dan.
By Dan Small
#212629 My apologies Crunchynut, I should have read your post more attentively. I missed this bit "If you default on the personal loan". I should have written that I haven't defaulted on anything yet and won't have before I declare myself bankrupt. I just called the Insolvency Service who confirmed that the bank can only secure the unsecured loan or attempt to secure it with a court order that must be granted before I'm declared bankrupt. If I don't default on any loan payments before I'm bankrupt, once I am bankrupt they can't secure the loan on the property. PHEW!!