When bankruptcy may be an option.

It may well not come to this. Banks and other holders of mortgages may be wise enough to give the tens of thousands who are losing their jobs a few years payment holiday. And before you accept any advice here, you must go and see your solicitor for his opinion as I am not qualified to give advice! But even so, the ultimate decision has to be yours.

However, If you canmnot meet your mortgage repayments and your mortgage lender won’t offer a payment holiday, and you have a negative equity in your house, bankruptcy could be considered.

If the mortgage lender tells you they want your house back, they will sell it at auction to the highest bidder, often without a reserve. If the resulting balance does not cover your debt to them, they will continue to come after you until it is paid – no matter how long. Many householders don’t realise this and think once the house is repossessed, that is the end of it.

I accept that becoming bankrupt is not an easy option if you work in the finance or any other industry concerned with money, and hope to work again in that industry so, before reading further, you need to think carefully about whether you intend to remain in that industry.

Going bankrupt will still mean losing your house, but if you do so before the banks foreclose on you, any balance after auction will be used to redistribute the money over all your creditors so your local traders will at least get a “slice of the action”. Of course, if you love your bank and want to help them, going bankrupt is, of course, not an option. In addition, if you do, all your credit card debts and bank loans will be written off.

Once you go bankrupt you are not allowed to pay anybody except through the courts so, if you have friends amongst local traders, and have savings, pay them off before you file for bankruptcy.

When you are bankrupt you cannot own a bank account or credit card during the year before discharge, unless you inform the bank concerned. This normally means you can’t if you ask a British bank. In the past American banks have usually allowed this, but in these times they may not.

Building Societies will, I believe, allow you to have an account with a pass book and although you cannot have a cheque book on the account, they will write their building society cheques for you if you need to send money in the post. If you are trustworthy and have a trustworthy relative known to the bank manager, he or she may underwrite a cheque account with your bank.

After one year you may apply to be released from bankruptcy and unless you have been less than honest in your initial petition, this is usually automatically granted. Initially go to the Building Society you have the passbook with and ask for a cheque account with a debit card. Later you can ask for a credit card.

Once you have decided that this is a good option, go to the courts and ask for all the forms. Fill them in at home carefully, and then go and see your mortgage lender and ask for a payment holiday of two to three years. If they refuse point-blank, ask them whether going bankrupt is an option as you have other large debts. If you see fear in their eyes, press again for a payment holiday. But whatever you do when you leave, go straight to the courts and file for bankruptcy. If you have mentioned bankruptcy, the mortgage lender will try and force possession immediately and you will not have much time to lose.


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