Cladding crisis debt – Can you go bankrupt
- 16 Oct 2021
If your property is affected by the cladding crisis, making the building safe is likely to result in you and the other leaseholders facing a huge bill. Given your property is unsaleable until the work is completed, you may be trapped. Going bankrupt can offer a way out.
Included in this article:
- How can Bankruptcy help you escape the cladding crisis?
- What steps do you have to take?
- How long until you can buy another property?
Want help to go bankrupt? Give us a call (0800 044 3194) or click here to complete the form below and we’ll call you back
How can bankruptcy help you escape the cladding crisis
The cladding crisis may mean you feel trapped in your property. You can’t afford the repair bill which can run into thousands of pounds. Equally, you can’t escape by selling until the repairs are completed which could take years.
If you are facing this situation, bankruptcy can offer a solution.
How? You can’t pay and you can’t sell. But, you can stop paying your mortgage, ignore the cladding bill and simply move out.
Once you have left the property, you can go bankrupt. This will then protect you against your old mortgage debt and any debt owed for cladding repairs or other maintenance arrears. These debts are and written off and you can start to rebuild your life.
This process is normally only suitable if you have made the decision to leave your property. If you want to stay, you may need to consider a different solution.
What steps do you have to take?
The first thing to do is make a plan to move out of your property and into rented accommodation.
You can’t count on help from your local council, so it is likely you will have to rent privately. This means you will need a deposit. You can save for this is by cancelling your mortgage payment. Instead of paying your mortgage, save the money to put towards a deposit and moving costs.
Under normal circumstances, you should maintain your mortgage at all costs. But if you already plan to leave it doesn’t matter. The mortgage lender is unlikely to take action to try and force you out for at least 6 months giving you time to save the funds you need.
Once you have moved, you tell your mortgage lender to start their repossession process (known as voluntary repossession).
Then you can go Bankrupt. This will protect you from the cladding debt and any mortgage shortfall after the lender repossesses the property.
The implications of going bankrupt vary depending on individual circumstances. It is important to speak to us before making any decision to move out of your property and apply for bankruptcy. We off free advice with no obligation. Call 0800 044 3194.
How long until you can buy another property?
After going bankrupt, it is not impossible to get back on the property ladder. However, it will be difficult to get a mortgage to buy a new property for at least 6 years.
The reason is after you go bankrupt your credit rating becomes poor. Although you will be discharged from bankruptcy after 12 months, the record will remain on your credit file for 6 years from the start date. During this time it will be difficult to get any form or credit.
Once 6 years has passed, given you get specialist advice, you should be able to get a mortgage with a high street lender at market rates (correct at time of writing).
It is also difficult to pass a letting agent’s credit check. So this is why it is important to move from your old property into rented accommodation before you go bankrupt.
Want further advice about escaping the cladding crisis by going bankrupt? Give us a call or complete the form below.