Bankruptcy and relocation

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My husband and I have decided that bankruptcy is the route we will be following due to accumulated debts. I have a fifteen month son and am unable to work to assist with these ever increasing debts due to the cost in childcare and travel as we are in a rural area.

We originally come from the south and have decided to return as there is more use of public transport and we have family and friends who can assist with childcare ensuring that we can at least obtain an income to live to minimum standards.

We have been informed that our house will sell at the exact mortgage price and so will not cover a 3000 penalty payment to our mortgage lender and will incur a shortfall after estate agent and solicitor costs.

Can this shortfall be added to our bankruptcy total??? If so do we sell before we go bankrupt or give the the house up after??

-- Tina Slater (freeme@ntlworld.co.uk), March 23, 2001

Answers

I would check with your local CAB, but I think that if you dispose of a major asset just prior to a bankruptcy filing, it contravenes some Law or other and gets you into hot water. As for the penalty amount, the Official Receiver will probably allow this to be added to the amount you owe under the bankruptcy. Be aware, however, that they will not consider you having a 15 month old as reason enough for you not to work. Despite childcare costs, you are considered available for employment and they may refuse to allow the bankruptcy on the grounds that you actually could work. When my delightful ex left me in massive debt, I took advice on this bankruptcy route and was told that even though I had two tiny children, I could work and earn reasonably well, childcare costs aside (nearly 900 pounds a month at the time). They looked at my potential earnings and added what was to be non-existent child support payments and decided I could survive. I was advised that the judge would not agree to me becoming bankrupt because the [ridiculously long term] potential to clear the debts was there. I wish you luck, however - perhaps things have changed in the last eight years.

-- Too scared to say (iwasduped@yahoo.com), March 23, 2001.

Sorry to hear about your problems. Are you absolutely sure that bankruptcy is the only route that you can take? There are other things such as administration orders, or just arranging lower repayments with your creditors can sometimes be enough to give you the break you need.

It is not necessarily the case that you will lose your home when you go bankrupt. Especially where there is a spouse who isn't bankrupt and for families with small children as well, you will get time to find somewhere else.

If you are wanting to sell your house, then you'll not normally be able to complete unless there are funds to pay everything off. If when your solicitor sends you a completion statement, there is minus figure, he'll ask you for the this balance before the completion takes place. The lender will not allow the mortgage to be redeemed unless the full amount is paid off. Where there is negative equity, sometimes a lender will come to an arrangement, but they don't seem keen to do this.

If you decide to make yourself bankrupt rather than a creditor doing it, then you'll have to pay a fee to the court to do it in the first place and then there'll be fees for the insolvency practitioner before the credtiors get anything.

If you do go bankrupt, you'll get a "trustee" or "insolvency practitioner" who'll look after your affairs. Anything that you have of value will be used to pay off your debts, property, endowment policies, savings etc. The trustee will then assess your requirements to live and give you an allowance. For example, if you were to get a job and earned 150 a week, the trustee might let you take 100 and use the 50 to pay creditors. Things required to run your home, such as bedding, utensils, cooker etc will stay with you.

Bankruptcy doesn't last forever, and after about 3 years or maybe sooner than that, you'll be released from bankruptcy and be able to start off with a clean slate. Of course, you'll still have to state that you were once bankrupt if you apply for a mortgage or credit.

Also, if you're likely to be due a large sum of money, say if a relative leaves you a legacy in their Will, then the insolvency practitioner can come after you and take that to pay creditors at some point in the future.

I would strongly suggest that you think very very carefully before going any further. You'll be able to get more information from www.insolvency.co.uk also.

If you want to write back privately with some more information, I might be able to point you in the right direction - as I said, sometimes you think bankruptcy is all thats left, but thats not always the case.

Pendle

-- pendle (pendle@amun-ra.demon.co.uk), March 23, 2001.


With regards to the mortgage penalty payment-have you tried to get this reduced at all?When my husband repaid his mortgage with the Bradford & Bingley they wanted a 2000 redemption penalty for his "cashback" mortgage as he had only had it for 2 and a half years- not their required 5 years. I sent a letter quoting a Press Release from The Office of Fair Trading's website and they immediately reduced the penalty by half. I then complained that he would be losing his chance of any shares when they were due to go plc and had not been informed in any of their correpsondence with redemption figures and they eventually reduced the penalty to 500. The quote I used was from "Note 3" at the bottom of the page of: www.oft.gov.uk/html/rsearch/press-no/pn43c-99.htm Remember to quote the Press release date of 18 Nov 99 and the Press Release number of PN 43c/99.

-- Michelle (michelle@easynet.co.uk), March 23, 2001.

I was unaware that 'they' could refuse a bankruptcy application on the grounds that the mother of an infant could work. I find this worrying, and I shall look into it.

Watch this space!

-- Eleanor Scott (eleanor.scott@btinternet.com), March 29, 2001.


I gather than a distinction might be drawn between a woman who is already working (i.e. has established a pattern of work, income, childcare arrangments and transport) and a woman of a small infant who has never established or intended to establish such a pattern, and who has no reasonable expectation or liklihood of establishing such a pattern given her particular circumstances.

It might not be fair, but not much is in this world. Similar things have happened when establishing divorce settlements and child maintenance payments.

I got this from a trade union rep I know. It's just opinion, of course.

-- Eleanor Scott (eleanor.scott@btinternet.com), April 04, 2001.



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