Bankruptcy or not?

[kallis3]

Independent advice is best sought now, pick up the phone and make a call.

[Broke of London]

Hi and a belated welcome from me. You do have a lot on your plate! You need to speak to an ip soonest to resolve this and enjoy your son. I have very little experience of debt solutions but think it may be worthwhile discussing using your £19k redundancy to offer a full and final iva on your unsecured debt. Believe it or not, £19k return on £60k-ish would be a pretty good dividend. NR do accept dividends on the unsecured part of a together loan while you continue to repay the mortgage element in full and your house will be safe. Creditors are not ogres and will understand that your new baby needs additional support from his parents which impacts on household income. Good luck and keep posting. X

[MelanieGiles]

You are unlikely to lose your house if you declare yourselves bankrupt, but your redundancy money could be at risk as the OR will generally only allow you to retain 6 months salary equivalent. Using some of this money to offer an IVA to creditors is possible, but do make sure that you don't run yourself short if employment prospects are not great in your locality. It might be better sticking with the DMP and using the redundancy money to continue with your monthly payments until you find a new job and then revisit the options when you can benefit from a little more security.

[Andrew Bowers]

Hi Oliver

Sorry to hear about your predicament. I suggest that you shop around for advice on options so that you can way up the pros and cons and make an informed decision. There's no need to rush into doing anything just yet. As Melanie quite rightly says, you can stay in the DMP and utilise your redundancy money for the time being to supplement your income until your financial position hopefully stabilises and improves for the better. If there is no prospect of this then you need to make alternative plans.

In the mean time it is imperative that you continue to pay your mortgage in order to avoid Northern Rock from commencing possession proceedings. Also ensure that you continue to pay other ongoing essential payments such as council tax and utilities etc.

If you go for the bankruptcy option the Trustee has 3 years in which to realise his interest in your property. He wont do anything if there is negative equity and you may be able to purchase your interest in the property shortly after the bankruptcy under the Official Receiver's conveyancing scheme for £201 (which covers conveyancing costs). But beware, you can't do this if there is equity!

[Adam Davies]

Hi Andrew and welcome
Are Trustees not now waiting for just over two years to value houses in bankruptcy ? rather than allowing the purchase of any interest shortly after the bankruptcy ?
Regards

[Skippy]

As far as I know, apart from in exceptional circumstances, beneficial interest won't be dealt with for a minimum of 2 years and 3 months from the date of the BR order. This applies even if the property is in negative equity.

[Andrew Bowers]

Where the Official Receiver ("OR") is acting as Trustee and no independent insolvency practitioner has been appointed, as far as I am aware, the Insolvency Service's normal policy for dealing with property in bankruptcy estates is being followed. Indeed, I've just agreed the value of a client's intrest with an OR today and they petitioned for their own bankruptcy about 4 months ago.

However, strictly speaking, the Trustee can wait to see if property prices rise during the three year period putting his interest back into positive equity so that a realisation can be made. I'm not aware of the Official Receiver adopting such a policy but there are numerous independent insolvency practitioners who are quite happy to sit and wait.

In my view, there is an inconsistency of treatment here.

I always warn people about the above when they are considering petitioning for bankruptcy and want to buy back their interest in a property that is currently in negative equity. They are effectively taking a gamble on (i) property prices, and (ii) whether or not an independent trustee will be appointed who'es prepared to wait and see.

Bankruptcy is a very serious step to take and I would always advise someone to seek proper advice as things can go pear shaped especially where a property is concerned.

[Andrew Bowers]

Whoops, the Official Receiver has just come out with a new policy for dealing with the family home which is along the following lines:

From 1st January the following changes came into effect:

The OR, as trustee of the bankruptcy estate, will no longer dispose of a bankrupt’s interest in a family home until two years and three months after the bankruptcy order is made, except if an offer is received which is in the creditors’ interests to accept.

At two years and three months a review will begin. In cases where the bankrupt’s interest in the property is valued at less than £1,000, steps will be taken to re-vest the property interest in the bankrupt.

Otherwise, if there is insufficient equity to attract an insolvency practitioner to act as the trustee of a bankruptcy estate, then enquiries will be made as to whether the bankrupt or a third party would be interested in purchasing the interest, assuming the property interest may be worth more than £1,000. If it is not possible to transfer the interest, and the interest is valued in excess of £1,000, the OR will consider applying for a charging order.

If there is sufficient equity in the property, and if the OR is not aware of any willing purchaser, a Secretary of State appointment of an IP trustee may also be sought.

The OR has the discretion to effect an early re-vesting of the property back to the bankrupt in specific circumstances.

[MelanieGiles]

This has been known about for several weeks now - unless the information I had was inappropriate leaked prior to the official announcement.

[Andrew Bowers]

Thanks Melanie
Just answering the question