Family Home - positive equity

[aamstudent]

Hi,
I have been following the PI Bill and attended some seminars.
I understand that the full details of how it will work may take some time to evolve.

However, I am curious about how the family home would be dealt with where the debtor has equity in it. All of the case studies I have seen show negative equity situation, usually because equity was previously released, or at best the home loan Ltv is 100%.

I am aware of several situations where debtors have a family home bought ten or more years ago and where the ltv is 40-60% but the debtor also 1-4 BTLs which are in serious negative equity - usually 2-3 times the positive equity in the home.

The PIA seems to protect the home within reason - as long as the debtor can afford to maintain those repayments and the home is not "excessive".

Can a BTL creditor try to take some of the equity in the home - either by forcing a mortgage increase or by getting a judgment, by consent or otherwise, on the family home?

The PI bill includes a provision that the debtor cannot be forced to dispose of an interest in the ppr. Would a judgment for the BTL creditor be a disposal of an interest in the pph by the debtor.

Maybe its too early to be asking this but it seems to be a situation that is reasonably common and not being discussed.

Thanks

 

[Brendan Burgess]

You are a good student. That is an excellent question.

The Dept of Justice gave out some case studies with the original bill.

Bizarrely it showed the situation very similar to what you have identified. If I remember correctly, the family home was almost mortgage-free and the buy to lets were in serious trouble. Their suggested solution was that the shortfall on the buy to lets would be written off after 6 years with no impact at all on the family home.

This, of course, is madness. The secured lenders would not agree to this. If someone speculated and lost, all assets including the family home should be sold to pay the liabilities.

Brendan