Mortgages for recently discharged bankrupts
Unfortunately, most high street lenders continue to treat you as a bankrupt and will decline to offer any kind of mortgage finance
We believe in giving people the chance to get their life back on track following bankruptcy. Our UK independent mortgage specialists can help you obtain a Bankruptcy Mortgage after you have finished your bankruptcy and have been discharged.
Bankruptcy is a legal status that usually lasts for a year and can be a way of clearing debts you can’t pay. When you’re bankrupt, your non-essential assets (property and possessions) and excess income are used to pay off your creditors (those you owe money to). At the end of the bankruptcy period, most debts are 'discharged' (cancelled).
A court can declare you bankrupt by issuing a 'bankruptcy order' after it's been presented with a 'bankruptcy petition'.
You can obtain a form (a debtor's petition) from your local county court for £150 plus a £310 deposit.
Your creditors can present a creditor’s petition if you owe them an unsecured debt of over £750.
Once bankruptcy proceedings have started, you must cooperate fully – even if it’s a creditor’s petition and you dispute their claim. If possible you should try to reach a settlement before the petition’s due to be heard - doing it later can be difficult and expensive.
Declaring yourself bankrupt is one way of dealing with debts you can no longer manage. An individual is described as being bankrupt when they are relieved from paying all debts once their assets have been surrendered to an appointed third party. Bankruptcy proceedings are managed via the court system, with the appointed third party designated by the court in charge of the proceedings.
You will be discharged from bankruptcy after three years. If your debts were less than £20,000 and you submitted the bankruptcy order yourself you will usually be discharged after two years. However, if you manage to pay all your debts in full plus the expenses of the bankruptcy order, then the court will annul the bankruptcy.
Personal bankruptcy has increased in recent times and there isn't such a stigma relating to bankruptcy these days. Up until the implementation of the Enterprise Act in April 2004, any person being declared bankrupt would have had to wait for around three years before their debt was discharged. Since the introduction of the Act, this time period has been reduced to just one year.
When you are ‘discharged from bankruptcy’ you are free from the restrictions of bankruptcy and released from most of the debts you owed at the date the bankruptcy order was made. The Official Receiver can apply to court for a Bankruptcy Restrictions Order, which will mean that you continue to be subject to restrictions after discharge for the period stated in that Order. This will not affect the discharge of your debts.
You will usually be discharged after 12 months, but if the Official Receiver files a notice in court before that time to say that he has concluded his enquiries into your affairs, then you will be discharged when the notice is filed. If such a notice is issued in your case, a copy will be sent to you so that you will know when you are discharged. If you do not co-operate with the Official Receiver (or the trustee, if an insolvency practitioner has been appointed as trustee in place of the Official Receiver), then the court may be asked to stop your discharge from taking place. An example would be if you refused to provide information to the Official Receiver or the trustee. If your discharge has been suspended (stopped) before 1 April 2004, you should contact the Official Receiver for information about how and when you may be discharged from bankruptcy.
You will normally get your discharge automatically even if no payments have been made to your creditors. If you are discharged automatically, you do not have to do anything to get your discharge. If you wish, you can obtain a certificate of discharge. A certificate is not necessary in most cases, but if you need one you should write to the court that dealt with your bankruptcy. Do not write sooner than 2 weeks before your discharge date. Give your name, address and court number (to be taken from the latest correspondence about your bankruptcy).
The court will check with the Official Receiver that you are entitled to an automatic discharge. You should receive a certificate confirming your discharge within about 4 weeks.
A fee of £60 is payable to the court for issuing a certificate of discharge (further copies will cost £1 each). You can also ask for the Official Receiver to advertise your discharge, but you will have to pay the costs of this before it is done.
The discharge period for the first category has been reduced to 12 months (conditions apply), however the bankruptcy information remains on a credit file for six years from the date of the order.
If you are declared bankrupt you will not currently be able to get a mortgage as the law prohibits it. Even if all your payments on your current mortgage are up to date, you are unable to improve your current situation due to the legal restrictions imposed on you.
Once your Bankruptcy is Discharged, there is nothing to stop you from borrowing money again, including remortgaging your property. However, most lenders will still consider you a ‘high risk’ and decline any application for a mortgage or remortgage.
This is not such bad news as there are lenders who recognise that a history of an ex bankruptcy is not necessarily an indication of a borrower’s ability to pay their mortgage.