Home protection

One of the most stressful elements of financial difficulties is the fear that your home could be at risk. Whilst there can be no guarantees, there are a number of ways to protect your home, even if you enter an IVA or are made or declare yourself bankrupt.

In many cases, it is wise to take action to protect your home even if you are currently in good financial shape. Very often, a person will raise capital on their home to finance a business or other venture which is not connected with their partner. The partner may agree to this (as they have to if the loan is to be made) but often no provision is made to recognise that the loan applies to only the partner needing the cash. If there are later problems, the loan will be assumed to be equally shared, thus penalising the partner and giving the person who truly used the cash an unfairly inflated equity in the home. This only benefits that person’s creditors. A Declaration of Trust set up at the time of the loan protects the partner and thus the home if things go wrong in the future.

Even if you did not set up a Declaration of Trust at the time, if you can show that this was the intention at the time the loan was raised but you simply did not know how to go about doing it, it may still be worth setting up a Memorandum of Trust now, referring to the earlier verbal agreement. This is not as good, but can be helpful.

In cases where there is equity in the home, it is best to sort this out immediately if you are bankrupt. Your partner or close friend can purchase your share of the equity at a proper valuation and this will prevent your Trustee claiming your home up to three years later, when the equity may be very much greater.

Likewise, if you enter an IVA, it is best to put any home equity that is to form part of the IVA in immediately, by e re-mortgage or other means. If you agree to a later equity clause, it could be costly for you.

If your home has been used as security for a bank loan, either to you or to your business, the bank may seek to take the home to settle the debt if you or the business is in default. If the security is in the form of a second charge, it may be that the first charge holder (usually your mortgage lender) will also make demand for payment. You can then lose your home. In these circumstances, it is best to try to reach agreement with the bank as soon as demand is made, offering to pay over a period and sometimes at a lesser amount. The sooner you act, the better your chances of success.

We can help you protect your home in the following ways:

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