Ex has a charging order on our house

[Julies6898]

Hi, hoping for some advice please. My ex, who hasnt lived in the jointly owned property for 10 years, has very kindly got a charging order on the house. If he goes bankrupt, firstly what will happen to the house and secondly what will happen to the charging order? We have 2 children that live with me in the house ages 16 and 11.

[Openlaw15]

Re: Ex has a charging order on our house

Hi, hoping for some advice please. My ex, who hasnt lived in the jointly owned property for 10 years, has very kindly got a charging order on the house. If he goes bankrupt, firstly what will happen to the house and secondly what will happen to the charging order? We have 2 children that live with me in the house ages 16 and 11.

How likely is it that a bankruptcy will happen? Is the debt worth several thousand? How many creditors are there? How much is owed and to whom? If the property has equity it has adequate security which means there is no need for a power of sale by the receiver. The receiver (appointed by law) can only take an interest in what your ex owns, on behalf of the creditor/s. You and the children (minors up to age 18) have separate legal rights to stay in the property. It's very unlikely the receiver would sell the property, so if there is an existing charge, the receiver may put an additional charge on the property. Technically, by law they have 3 years from the bankruptcy date. A creditor whose pre bankruptcy charge affects the property may try to get a sale. It is very unlikely. If there are no problems with the mortgage, ie no arrears with the bank, the bank won't try to take possession of the property either.

In general

Any charge a creditor has before a bankruptcy survives it so stays on the property, before and after the bankruptcy period (a year) has completed. If the property was jointly owned prior to the property charge (security interest against the debt, and not providing an interest in the property itself), then it's likely you both now own separate parts of the property currently.

A charge legally severs a joint tenancy, turning it into separate ownership/ divided shares, known as tenancies in common. Have a look at your property's register (if the property is registered, will be if purchased after 2003), and if you see the word 'restriction' under 'absolute ownership' then it's a property divided by shares, ie tenancy in common. It means if one of you died the property wouldn't pass to the other automatically, so any Wills affecting the property would be legally valid. It also means the receiver in bankruptcy can only take an interest in your ex's share of the property (tenancy in common).

[Julies6898]

Re: Ex has a charging order on our house

Hi, thanks for your reply. I think it is quite likely it will happen. The debt is £70,00 from a buy to let property that went into mortgage arrears so the property was eventually sold for much less than it was bought for. There are possibly other debts im not aware of but the main one is this that has ended up with a charging order on the house. He no longer lives in the country. It has around £20-£25,000 equity. There are no arrears. So from my point of view, would nothing change if he went bankrupt? Who would actually own his half of the house? Would it affect my credit rating badly?

[meellis]

Re: Ex has a charging order on our house

They are only entitled to look into his share of any equity within the property which could be £10-£13,000 say but that would only hold true if he has been contributing fully to the mortgage and costs of the property since he hasn't lived there. The more you could prove that you might have contributed than him over this period the less claim he would have over half of the equity. If you feel he might end up bankrupt start making lists on how bills are paid, maintenance is carried out and the mortgage payments are arranged. If the insolvency service start looking to re-coup any equity from the property you will need to be able to fight your corner and demonstrate how little he may be entitled to. If it is enough for them to consider trying to re-coup then you or somebody can offer a sum to buy the equity, In other words they are only interested in the sum of money that might be due to them if they forced a sale not actually forcing a family out of a home. If you have to negotiate a deal with them always bear in mind their legal costs to force a sale and leave you and your family in a realistic position and the realistic sale price and you might be realising that after all that they wouldn't be left with much. I wouldn't want to say they wouldn't do anything but the figures you are talking of it would seem unlikely.

[Diana M]

Re: Ex has a charging order on our house

My ex, who hasnt lived in the jointly owned property for 10 years, has very kindly got a charging order on the house. If he goes bankrupt, firstly what will happen to the house and secondly what will happen to the charging order? We have 2 children that live with me in the house ages 16 and 11.

Hello Julies

You've raised some 'what if?' questions and so far you've got some hypothetical answers to your hypothetical questions.

So first things first.

Is/was your "ex" once a husband, and if so are you now divorced with a formal financial arrangement in place (i.e. a court Order)? In other words 'who owns what' legally speaking?

Di

[Julies6898]

Re: Ex has a charging order on our house

They are only entitled to look into his share of any equity within the property which could be £10-£13,000 say but that would only hold true if he has been contributing fully to the mortgage and costs of the property since he hasn't lived there. The more you could prove that you might have contributed than him over this period the less claim he would have over half of the equity. If you feel he might end up bankrupt start making lists on how bills are paid, maintenance is carried out and the mortgage payments are arranged. If the insolvency service start looking to re-coup any equity from the property you will need to be able to fight your corner and demonstrate how little he may be entitled to. If it is enough for them to consider trying to re-coup then you or somebody can offer a sum to buy the equity, In other words they are only interested in the sum of money that might be due to them if they forced a sale not actually forcing a family out of a home. If you have to negotiate a deal with them always bear in mind their legal costs to force a sale and leave you and your family in a realistic position and the realistic sale price and you might be realising that after all that they wouldn't be left with much. I wouldn't want to say they wouldn't do anything but the figures you are talking of it would seem unlikely.

Ok thank you. He has been paying maintenance since he left but not actually paying the mortgage company. The mortgage has been coming out of my bank account.

- - - Updated - - -

Hello Julies

You've raised some 'what if?' questions and so far you've got some hypothetical answers to your hypothetical questions.

So first things first.

Is/was your "ex" once a husband, and if so are you now divorced with a formal financial arrangement in place (i.e. a court Order)? In other words 'who owns what' legally speaking?

Di

Hi, no we were never married and have no court order. We have just agreed verbally. He has always paid maintenance but nothing to the mortgage company, the mortgage has been paid from my bank account since he left.

[meellis]

Re: Ex has a charging order on our house

I am sure Diana will give you great legal advice I have just experienced bankruptcy and had to deal with my parents share of the family home which was in my name. I would imagine you are more than a little concerned at the moment but until something happens you are I am afraid powerless. How did he manage to get the charge and why? Have you only just become aware of it or did sign documents to allow him?

[Openlaw15]

Re: Ex has a charging order on our house

Hi, thanks for your reply. I think it is quite likely it will happen. The debt is £70,00 from a buy to let property that went into mortgage arrears so the property was eventually sold for much less than it was bought for. There are possibly other debts im not aware of but the main one is this that has ended up with a charging order on the house. He no longer lives in the country. It has around £20-£25,000 equity. There are no arrears. So from my point of view, would nothing change if he went bankrupt? Who would actually own his half of the house? Would it affect my credit rating badly?

Hi again Julie

You say the main debt is £70k. Are you saying the charge on your current property is for 70k? So, if your ex hasn't been paying the mortgage for 10 years, you could argue to the receiver (negotiate) that his share in the property was much less when the charge had terminated the JT. If the equity is £20-25k, assume the receiver has 50% before the mortgage deductions. So, assume 12.5k - Mortgage payments X 10 years. The receiver will enquire whether your ex has contributed to the household bills in anyway. He (the receiver/ insolvency official) may try to argue that given the fact your ex partner paid maintenance that this should be added to the amount. Some couples have arrangements where one pays the mortgage and the other pays the household bills, and the law recognises this as equal shares too, in some instances. Is the debt in your ex's name only even though it's a charge on your home/ property? If so, argue (persuade with reasoning) that your ex's £70k debt cancels out any equity your ex held to give to the receiver. A cancelling out would be, in £: 12.5k - 70k = £-57.5k.

Property law (in general): Ownership and Shares

Ownership of property can only be held either through a joint tenancy (JT) or a tenancy in common means, ie by deed (title) = watertight secure. A joint tenancy also means the property is owned between you both but no person has a share until the joint tenancy (JT) ends, ie via a severance likely through a charge etc. The tenancy in common works the opposite way (ie it assumes shares). When the JT ends, the law states there's a 50/ 50 presumption of 'equal shares.'

Insolvency: property

The receiver/ insolvency person will automatically presume a 50/ 50 share in your ex's favour since there was an original joint tenancy to begin. This is likely to have happened when the creditor had a charge put on the property, so a charge is said to terminate a joint ownership, realising shares: equal or un-equal. The previous JT presumption (of equal shares) is true of course unless it can be rebutted (challenged). This is property law so the receiver will follow it to the letter but it's in their interest to do so anyway as it's obviously a valuable incentive for them.

However, as @meellis alludes, because you have been paying the mortgage for the last 10 years by yourself, in your view anyway the presumption of 50/ 50 share has been rebutted. So start off with 50/ 50 (equal) share then deduct the amount for the mortgage payments X 10 years. The receiver will try to argue the contrary as I stated above.

I hope this explanation is not too technical, it's just that I want to guide you so that the receiver does not take advantage, for when he/ she uses technical jargon such as 'beneficial ownership', which incidentally means any rights your ex had from the original JT or current Tenancy in common. So, beneficial ownership/ rights in your situation would be your ex's equity in the property.

[meellis]

Re: Ex has a charging order on our house

It could prove to be one of those strange situations that the charge could help in the bankruptcy but will hinder your future. Bankruptcy only covers unsecured debt so if the charge is for an outstanding debt of your ex's it would have to be paid as well as the mortgage in the case of house sale hence it works against the equity. If it is for the £70,000 (assuming with no details) then there will be no equity in the property for the receiver. Like a say good for the bankruptcy but bad for the future when the mortgage is paid and there is still this debt against the property.

[Openlaw15]

Re: Ex has a charging order on our house

It could prove to be one of those strange situations that the charge could help in the bankruptcy but will hinder your future. Bankruptcy only covers unsecured debt so if the charge is for an outstanding debt of your ex's it would have to be paid as well as the mortgage in the case of house sale hence it works against the equity. If it is for the £70,000 (assuming with no details) then there will be no equity in the property for the receiver. Like a say good for the bankruptcy but bad for the future when the mortgage is paid and there is still this debt against the property.

If the £70k debt was not in her name, she has a good argument to stop any post bankruptcy attempt by the creditor/s charge, for a power of sale. A secure creditor such as a bank (mortgagee) would have priority and next is the creditor's pre-bankruptcy charge. Where there is more than one charge, it comes down to priority by the date it/ they was/ were registered against the property, I believe. If the mortgage was via deed and registered on the property's land register, it's very secure (ie a legal interest). In her circumstances, there may not even be a bankruptcy as the bank, creditor, and receiver may try to work together to force a sale. A bankruptcy will only be accepted if there is something to gain by the receiver. The receiver may just stand aside and let the creditor - as charge - apply for a sale, whereby the bank will be paid first on sale.


Over-riding interests:

She however has legal rights which create land protected by trust (or trust of land), for her and the family, in addition to registered occupancy rights: Land Registration Act 2002. These are called over-riding interests. So any challenges for sale said persons attempt could be defeated.

Over-reaching:

However, if the bank wanted to play dirty it could appoint another trustee, which in addition to the receiver/ trustee could force a sale legally that way. This is called over-reaching, as it over-reaches (surpasses) any over-riding interests in the property she/ her family held. It is vital therefore that the receiver does not add any more charges or other things that reduce her 12.5k interest in the property she holds, as the less equity she has the more likely the chargees (including the bank) could potentially force a sale. The creditor's charge in real terms only has an interest against the debt, so such chargees are known as beneficial charges.

[Julies6898]

Re: Ex has a charging order on our house

If the £70k debt was not in her name, she has a good argument to stop any post bankruptcy attempt by the creditor/s charge, for a power of sale. A secure creditor such as a bank (mortgagee) would have priority and next is the creditor's pre-bankruptcy charge. Where there is more than one charge, it comes down to priority by the date it/ they was/ were registered against the property, I believe. If the mortgage was via deed and registered on the property's land register, it's very secure (ie a legal interest). In her circumstances, there may not even be a bankruptcy as the bank, creditor, and receiver may try to work together to force a sale. A bankruptcy will only be accepted if there is something to gain by the receiver. The receiver may just stand aside and let the creditor - as charge - apply for a sale, whereby the bank will be paid first on sale.


Over-riding interests:

She however has legal rights which create land protected by trust (or trust of land), for her and the family, in addition to registered occupancy rights: Land Registration Act 2002. These are called over-riding interests. So any challenges for sale said persons attempt could be defeated.

Over-reaching:

However, if the bank wanted to play dirty it could appoint another trustee, which in addition to the receiver/ trustee could force a sale legally that way. This is called over-reaching, as it over-reaches (surpasses) any over-riding interests in the property she/ her family held. It is vital therefore that the receiver does not add any more charges or other things that reduce her 12.5k interest in the property she holds, as the less equity she has the more likely the chargees (including the bank) could potentially force a sale. The creditor's charge in real terms only has an interest against the debt, so such chargees are known as beneficial charges.

Thanks for your reply and sorry for the delay. You may have said but can i just clarify, who or what would own my ex's share of the house if he does go bankrupt?