Imagine this: a home owner falls on hard times. He (or she) tries to sell the property and can’t do that either in good time, due to negative equity or for the price he would ideally like to achieve.
Unfortunately the home owner can find a suitable sell and rent back company to sell the property to. Lender repossesses the property. End of debt problems, right? Wrong. This does not end there!
Should a home owner ignore the arrears problems, and let the mortgage company repossess the property, it will not be the end of the home owner’s debt problems. The lender can come after the borrower for years afterwards for the unpaid debt or arrears.
The process of repossession involves the mortgage company taking ownership of the property and then selling it. They may do this at a property auction or through an estate agent. Legally they are obliged to sell the property for the best price that can reasonably obtain.
However even after the mortgage lender takes a property into their possession, interest will continue to be charged until the day the property is finally sold. Any legal costs, estate agent or auction house fees and any other charges are also added to the mortgage. Any surplus of the sale are sent back to the borrower. However if proceeds of the sale did not cover all the debt in full then former borrower faces a "shortfall debt". This means that the money is still owed to the lender even after possession.
How long after the repossession can lenders seek the recovery of the debt?
A very long time – is the short answer!
In England, Wales and Northern Ireland, law permits the lender to pursue the borrower for up to 12 years to begin the process of obtaining repayment of the shortfall debt. In Scotland this period is restricted to 5 years.
Advice for Home Owners Facing Repossession
They should avoid throwing in the towel and do every thing they can to stop repossession of their home. We are not saying that most home owners do not do this. However it pays to stay calm, collective and explore every possible avenue. Speak to all friends and family, seek advice from govt agencies like Citizens Advice Bureau etc and seek advice. At least you will have the satisfaction that whatever the outcome, you have explored all possibilities and did your best in stopping repossession of the property.
Filed under: Stop Repossesion
