Question about potential repossession shortfall

[m2000]

Hi,

 

My understanding is that if there is a shortfall following repossession, the mortgage company has 12 years to chase you.

 

If the mortgage company then sell the shortfall to a third party, such as a debt collection company, do they still have the same rights? I.e. still have twelve years to chase even though they're not the actual mortgage company and as such didn't actually suffer th loss in the first instance.

 

Thanks

[Bandit127]

You are basically correct - the Limitation Act gives 12 years for a mortgage. (The Council of Mortgage lenders advise their members not to chase a debt if they have not been in touch for 6 years).

 

The same 12 year limitation period applies to a DCA who may have bought the rights and duties to a debt (i.e. the right to be paid on a debt). The Law of Property Act entitles the DCA to claim for payment.

 

Can I ask what this is about. Do you have a shortfall that is now with a DCA?

[m2000]

Hi Bandit,

 

The situation is that my home is in negatve equity to the tune of approx £40k, I am pouring good money after bad every month and the houses in this area are going down in price not even levelling. To give you an idea, the same developer is building a new phase down the road and the equivalent home is £28,000 less than I paid for mine six years ago! I also have significant unsecured debt of circa £15k.

 

Theoretically, I was thinking of voluntarily surrendering the property back to the lender. The shortfall will then be unsecured, and I could go down the IVA route to deal with the debts.

[m2000]

Forgot to mention, I have tried to sell for over a year but no one has even made an offer due to the new houses down the road being so much less.

[citizenB]

Ah, so you are expecting the house to be sold at a great loss !

 

Is there anyway the mortgage provider will renegotiate the term over which you have borrowed - it will obviously cost you more interest wise in the long run but if they can add a few years on to the term and reduce the monthly repayments.. would that help.. perhaps give the market time to pick back up again as well !

[Bandit127]

5 years ago I was made redundant and had to move to continue my career. The plan was to sell my flat and buy a new property near my new job.

 

The collapsing housing market caught me out and I could not maintain mortgage payments on the flat as well as rent in my new location. Renting the flat was not an option - I would have been £200 short a month.

 

I got (very good) advice from CAB at that point. The advice he gave me was:

1. To go Bankrupt (I didn't).

2. Not to do a voluntary surrender. He told me to write outlining my new circumstances, telling them that the flat was secured and vacant and asking them to consider repossession.

 

By signing a voluntary surrender form, you may well give up some of your rights.

 

Also know that your expectations for the shortfall will probably be exceeded. I expected £15k and got £50k...

 

You should consider all options - but surrendering your property and bankruptcy must be the last options...

[m2000]

Hi Bandit,

 

Thanks for your reply. Do you mind me asking, how have you coped with the £50k shortfall? Payment plan? IVA?

Thanks

[m2000]

Bump