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Bankruptcy in US/ Mortgage in UK

Bankruptcy in US/ Mortgage in UK

Old Aug 17th 2010, 8:57 pm
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Default Bankruptcy in US/ Mortgage in UK

Time for a bit of a vent, mostly at ourselves but here's the story (and reason for trying to get the 401k money in the thread below).

We bought our house in 2004/5 and instantly had problems. It was towards the top end of our price range. I didn't want it, honest, but was talked into it as it was a "great town, great schools......" all true "houses in this town always sell quickly...." not true! As I said it was on the verge of being too expensive but then the roof needed replacement and meant we had to spend a ton on new roof, kitchen reno and we needed other bits and pieces too.

To cut a long story short it's now on the market for less than we paid before we did work on it but I had saved and put a lot of money down so we're about breaking even. Having said this my work transfer home is happening now, any renters would be paying less than our mortgage and the place doesn't look like selling even at the price it's at.

We're going to go lower and are doing our best to get out of trouble, I am not trying to wheedle out of any debts but we are facing the prospect of giving our house back to the bank.

If this happened and in the future we try for a mortgage again how much impact does it have in the UK? I'm guessing you have to disclose a previous bankruptcy but what is the best thing to do? Thanks in advance.
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Old Aug 19th 2010, 3:05 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by smarshall View Post
Hi, I am an Expat Mortgage Specialist in United Kingdom; I am a new member of this forum. Any British Expatriates and Foreign Nationals looking for UK and Overseas Mortgages can seek advice from me!

Post gone in 3.......2.........
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Old Aug 19th 2010, 6:34 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

Somebody must be on a tea break because the post is still here!
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Old Aug 19th 2010, 7:01 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

To the OP, well I was under the impression that is does not count in the UK, ( ducking in case of anything flying my way) only from what i have read on here, in the thread 50s 60s I do know there are a couple of people who had to just give back the keys.....couldnt sell couldnt stay....... many many of us here are in the same boat with regard to property, we paid $273.000 10 years ago, one sold 5 houses down the road, this week after being empty for 2 years exact same style with finished attic etc for 200,000 very sad indeed. We did not have much to put down just enough to get by...........I was like you got talked into it by my husband though, i had kinda given up by then.....
I am sure you will get advice soon from those who have been there done it......
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Old Aug 19th 2010, 8:40 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by Pauljarv View Post
Time for a bit of a vent, mostly at ourselves but here's the story (and reason for trying to get the 401k money in the thread below).

We bought our house in 2004/5 and instantly had problems. It was towards the top end of our price range. I didn't want it, honest, but was talked into it as it was a "great town, great schools......" all true "houses in this town always sell quickly...." not true! As I said it was on the verge of being too expensive but then the roof needed replacement and meant we had to spend a ton on new roof, kitchen reno and we needed other bits and pieces too.

To cut a long story short it's now on the market for less than we paid before we did work on it but I had saved and put a lot of money down so we're about breaking even. Having said this my work transfer home is happening now, any renters would be paying less than our mortgage and the place doesn't look like selling even at the price it's at.

We're going to go lower and are doing our best to get out of trouble, I am not trying to wheedle out of any debts but we are facing the prospect of giving our house back to the bank.

If this happened and in the future we try for a mortgage again how much impact does it have in the UK? I'm guessing you have to disclose a previous bankruptcy but what is the best thing to do? Thanks in advance.
Does handing the keys to the bank and leaving them with the debt necessarily involve declaring bankrupcy?
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Old Aug 19th 2010, 9:16 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

Weird that the mortgage broker posted without answering the question

Originally Posted by Pauljarv View Post
If this happened and in the future we try for a mortgage again how much impact does it have in the UK?
I spoke to a mortgage broker who specializes in ex-pat mortgages. He explained that if we sought a mortgage when we first returned, we'd be using an offshore lender rather than a UK high street branch. He said those lenders would check US credit history and make a loan provided our US history checked out.

So I'd assume your walking away would hurt you with those lenders because your US credit history would be trashed. But I don't know what would happen if you rented for a few years, built up a UK credit history and then applied for a mortgage with a UK lender. They might not check your US credit history at all - it's worth asking an expert.
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Old Aug 19th 2010, 10:22 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by DDL View Post
Somebody must be on a tea break because the post is still here!
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Old Aug 19th 2010, 11:02 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

So can you really 'just hand back the keys' because seriously if our place hasn't sold by next spring I'd be happy to give it back to them. Wouldn't you still owe them, can't see how you could just walk away seems too easy.
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Old Aug 20th 2010, 12:19 am
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by the davis family View Post
So can you really 'just hand back the keys' because seriously if our place hasn't sold by next spring I'd be happy to give it back to them. Wouldn't you still owe them, can't see how you could just walk away seems too easy.
All this in detail depends on national/state/province laws that vary, but in general:

... if you do that, you still owe the debt in full and the bank can still pursue you for the difference on the sale.

The only way around that is to either declare bankruptcy or make a formal, written arrangement with the bank to accept the sale of the property and in return, write-off your remaining debt.

If your property is worth more than the mortgage, you need to price it realistically in order to sell it. If you owe more than your house is worth, then your next steps depend on what other assets and income you have. Get professional advice where you live.

Back in the early 1990s, many British homes were repossessed (or the "keys handed in") and the borrowers did not either declare bankruptcy or make a formal arrangement with their creditors. As a result, the debts remained in place with interest and penalties piling up and then some years later, when people had got their lives together, the banks came after them for the outstanding debt.

Bankruptcy, or the alternative of an arrangement with creditors, is never an ideal solution. Generally it leaves the individual with little or no assets, a bad credit record and can have consequences for one's employment in some occupations in future - but may still be preferable to a debt mountain that can never be paid off.
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Old Aug 20th 2010, 2:00 am
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by JAJ View Post
All this in detail depends on national/state/province laws that vary, but in general:

... if you do that, you still owe the debt in full and the bank can still pursue you for the difference on the sale.

The only way around that is to either declare bankruptcy or make a formal, written arrangement with the bank to accept the sale of the property and in return, write-off your remaining debt.

If your property is worth more than the mortgage, you need to price it realistically in order to sell it. If you owe more than your house is worth, then your next steps depend on what other assets and income you have. Get professional advice where you live.

Back in the early 1990s, many British homes were repossessed (or the "keys handed in") and the borrowers did not either declare bankruptcy or make a formal arrangement with their creditors. As a result, the debts remained in place with interest and penalties piling up and then some years later, when people had got their lives together, the banks came after them for the outstanding debt.

Bankruptcy, or the alternative of an arrangement with creditors, is never an ideal solution. Generally it leaves the individual with little or no assets, a bad credit record and can have consequences for one's employment in some occupations in future - but may still be preferable to a debt mountain that can never be paid off.
Thanks, just as I thought not quite as simple. We do have our place for sale realistically nothing selling here at moment, by next spring we could go lower and come out with basically nothing. But if we have to go lower again then we would owe, If that happens we will seek professional guidance. I just want to be able to leave next year with a clear conscience (and the ability to return if I ever wanted)

Last edited by the davis family; Aug 20th 2010 at 2:04 am.
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Old Aug 20th 2010, 2:02 am
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by the davis family View Post
Thanks, just as I thought not quite as simple. We do have our place for sale realistically nothing selling here at moment, by next spring we could go lower and come out with basically nothing.
If "nothing is selling" then you have to ask is price realistic? Unless in a remote community where there may simply be no liquidity in the market, there is usually no such thing as "can't sell".
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Old Aug 20th 2010, 2:06 am
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by JAJ View Post
If "nothing is selling" then you have to ask is price realistic? Unless in a remote community where there may simply be no liquidity in the market, there is usually no such thing as "can't sell".
Yep remote area to say the least Also nearest town has been under a state of emergency due to flooding (our propety was fine) plus it's an acreage so they do take longer.
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Old Aug 20th 2010, 12:25 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

If you use Google, you should find a number of articles from reputable papers like the NY Times on the practice of "handing the keys back" to the bank, in situations where you owe more than the house is worth. Of course, "handing the keys back" is a somewhat metaphorial phrase (although some people literally do that).

The law varies from state to state.

The law generally is more lenient in the US than the UK.

There are companies in the States that for a relatively small sum will lead you through the legal paperwork to do this.
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Old Aug 20th 2010, 7:07 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by dunroving View Post
If you use Google, you should find a number of articles from reputable papers like the NY Times on the practice of "handing the keys back" to the bank, in situations where you owe more than the house is worth. Of course, "handing the keys back" is a somewhat metaphorial phrase (although some people literally do that).

The law varies from state to state.

The law generally is more lenient in the US than the UK.

There are companies in the States that for a relatively small sum will lead you through the legal paperwork to do this.
I'm in Canada
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Old Aug 20th 2010, 10:26 pm
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Default Re: Bankruptcy in US/ Mortgage in UK

Originally Posted by the davis family View Post
I'm in Canada
Oops, got you and the OP mixed up.
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