Bankrupt’s Perspective
From a Bankrupt’s perspective, if he is interested in staying in his family home, he is in a better position post adjudication to pay his mortgage with his commitments to pay all his other debts written off. As mortgage payments are allowable as part of reasonable living expense in bankruptcy, he will be allowed pay reasonable mortgage payments and if he wants to stay in his house he will be so allowed, if the payments are reasonable. Similarly the length of the bankruptcy period will not be a significant factor for the Bankrupt in whether he can stay in his house, since as stated above, that depends on whether he has the capacity in bankruptcy to pay his mortgage and the 3 main benefits of the reduction will not significantly benefit the Bankrupt to make an unsustainable mortgage sustainable. If mortgage is unsustainable post adjudication, then reduction of bankruptcy period from three years to one year with income payment commitment for three years, will clearly have no effect in making it sustainable. What may well however be the most significant change if the bankruptcy period is reduced from 3 years to one year, is debtor attitudes to handing back the keys of the family home and then going bankrupt, crystallising the full negative equity therein, as bankruptcy will clearly be more attractive for reasons above stated. With majority of persons who have surrendered their homes voluntarily, having done so prior to being adjudicated bankrupt, they clearly for whatever reason have lost out on possibility if they so wished of retaining their home in bankruptcy.
With majority of persons who have gone into bankruptcy and sought to retain their homes being successful in being allowed make their mortgage payments to extent agreeable to Lender and OA and retaining their family homes, it is clearly important for such persons bankrupting themselves, to wait until they are assessed post adjudication, before surrendering family homes.
Clearly some of these people will decide it is in their best interests to surrender their family homes, some will have delayed too long before engaging with their Lenders and some circumstances may be impossible to resolve, because there is simply no income to pay the mortgage and willingly or unwillingly the houses are lost by surrender or Court order prior to adjudication. It is clearly of utmost importance that all insolvent persons seeking to resolve their financial difficulties obtain the best advice possible on the full range of insolvency processes available to them. If bankruptcy is the best option for them then they should be professionally advised on all aspects of the process, how quickly they should apply for bankruptcy and in particular at the earliest possible time, on whether it is in their interests to seek to retain the family home or surrender same to the Lender. They should have their circumstances post adjudication analysed to see whether with all their other unsecured debt repayment commitments ceasing on bankruptcy, they could afford to keep their family homes rather than surrender same, which they might otherwise unwisely do under pressure from creditors pre bankruptcy.