Avoiding Repossession in Hard Financial Times
Repossessions are at their highest rate since the early stages of the recession. Fortunately, the bad old days of landlords being able to reoccupy homes following the failure of a single payment have long passed and there are now stiff new procedures and rules that must be followed before a repossession order will be granted by a court. So when debt problems occur it makes sense to research all the options available and set up a robust debt management plan that may include debt consolidation as an option.
Lenders, whether in England and Wales or in Scotland (where the rules are different) have to take broadly the same steps before they can effectively repossess a property. That means that anyone with debt problems will receive written notice from their lender of the impending action with the final resort being actual physical repossession. Therefore, any borrower should act immediately upon receipt of any letter from their lender to address debt problems and rearrange finances to ensure that the mortgage payment is met.
At the heart of solving any debt problems is a solid debt management plan. This looks at all outgoings and prioritises those payments that have to be made, such as mortgage, council tax and utility bills, from those that are discretionary, such a gym memberships, entertainment and smoking. At this stage, it may be possible to identify ways that a debt consolidation loan could help free up monthly cashflow. A new loan with payments structured over a longer time frame can pay off short term credit or store card bills and other large monthly instalment loans. This, alone, may free up enough cash for the mortgage payments to be met in full particularly if additional actions are taken to help reduce expenditure.
In order to start repossession proceedings, lenders must send a written notice including details of what is owed and what penalty charges or additional interest is payable on the overdue mortgage. In addition, they must discuss with the borrower the reasons behind the arrears and whether the factors that are causing the debt problems are short or long term in nature. At this stage, the lender can suggest ways to address the arrears such as changing the date of the monthly payment to one which matches available cash or by rescheduling the loan to reduce payments.
In addition to specific discussions around the mortgage loan, a lender must also advise the borrower of the local council’s housing department and provide a reference to an independent debt advisor. Their involvement in a debt management plan may be sufficient to stave off any action whilst a debt consolidation and management plan is worked out.
The borrower always has the option of selling the property and using the proceeds to clear the arrears and loan balance. This action may be sufficient to stop the lender pursuing repossession provided that the sale process is not unreasonably managed. A managed sale should realise more that a distress sale by the lender and with the borrower still liable for any shortfall or the beneficiary of any proceeds there is a lot to be gained by this approach. Handing the keys back to the lender and walking away is a last resort strategy that will not let the borrower off the hook for prior debt.
If the lender has followed all the necessary protocols and the borrower considered all the actions, including a debt consolidation loan, then it may be that the repossession proceedings will get to court. At this stage the borrower should seek out professional help since there are a number of defences that can be pleaded to the court that can prevent repossession. Individual personal circumstances will be taken into account and factors such as no alternative accommodation or pending benefits applications will be favourably considered. Making the case in court can be a daunting process but borrowers should turn up and make their case with professional help. The courts are there to ensure due and fair process is undertaken and may give time orders or even prevent repossession if there is genuine intent to get an account back up to date.
Even though there may be numerous debt problems that have led to a failure to make mortgage payments it does not mean that the family home has to be repossessed. Every personal circumstance varies and getting all the details known plus an attitude of wanting to address debt issues in a positive way can prevent losing the family home. Professional advice is essential as is early action to address debt problems so as not to end up threatened with a repossession order.
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