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Clare
Clare, Solicitor
Category: Bankruptcy Law
Satisfied Customers: 34486
Experience:  I have been a solicitor in High Street Practice since 1985 with a wide general experience.
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My STBX husband has a final charge registered against the

Resolved Question:

My STBX husband has a final charge registered against the jointly owned FMH for the last five years and is gaining interest at 8%. There is no incentive for him to pay it as I have all the remaining beneficial interest in the home belongs to me since he was declared bankrupt.Would the final charge which is listed as a form K restriction on the land reg docs be considered a secured debt?
or
Should the final charge have been written off in his bankruptcy?Surely it sole debt can't be secured against a joint property. So can I have it removed as a restriction and if so how would I go about doing this?
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  Clare replied 1 year ago.

Thank you for your question

My name is Clare

I shall do my best to help you but I need some further informtaion first

When did he go bankrupt?

Customer: replied 1 year ago.
Petition for bankruptcy Nov 2010
Bankruptcy order Apr 2011
Final charge Jan 2011
Expert:  Clare replied 1 year ago.

What is the charge for?

Customer: replied 1 year ago.
He had joint business debts with his partner relating to default on their lease. His partner went bankrupt before the final charge, so I think the creditor can only recover from my husband.
Expert:  Clare replied 1 year ago.

So the Charge was Registered prior to the bankruptcy?

Did you purchase your ex's share of the property at the time of the bankruptcy

Customer: replied 1 year ago.
I have a deed of assignment for my husband's beneficial interest.
Customer: replied 1 year ago.
Which was purchased from the TIB
Expert:  Clare replied 1 year ago.

I assume that the Charge was taken into account when agreeing the price?

Customer: replied 1 year ago.
I guess, but the house was in negative equity at the time anyway
Customer: replied 1 year ago.
My question is;
If only secured debts can survive bankruptcy, and a final charging order can not be secured against a jointly owned property the same way a mortgage would be, then surely the charging order is still an unsecured debt as a form k restriction would not secure it against my home?
Expert:  Clare replied 1 year ago.

It is a little more complex than that

Did you attend Court when the Charging Order was applied for?

Customer: replied 1 year ago.
No I did not. I was advised by a solicitor that there was no point.
Customer: replied 1 year ago.
It seems very unfair because there is no incentive for him to pay the debt and he has no interest in the house. The charge has fees and 8% interest being added to it and that is eating into my equity the longer it remains. How can that be allowed? So what started out as his joint business debt of £11500, and was approx £14000 at time of bankruptcy and when I purchased his beneficial interest, now stands at £17000 and will just continue to rise until I pay it - and it's not even my debt! :(
Expert:  Clare replied 1 year ago.

Actually there would have been - the Charging Order would not have been made.

What is the equity now?

Customer: replied 1 year ago.
I don't think there was, my husband just buried his head in the sand and did not attend court homself. Who would have established what the equity was? I bought the interest from the TIB at £250 which was mostly legal cost of drafting the agreement. This was because there was no equity. The house now has approximately £100k equity.
Customer: replied 1 year ago.
I suppose there is no point raising this with the solicitor who advised me or complaining to the legal ombudsman now that we're over 5 years on.
Expert:  Clare replied 1 year ago.

Sadly no.

However there are still some points to look at

Is the hose the only asset - and what income do you each have?

Customer: replied 1 year ago.
Since husband's bankruptcy he has no assets or savings. Although he is still the joint owner of the FMH. I have one other BTL property. I work part time in a modest salary and he has some contract work on and off but no proper job as such.
Expert:  Clare replied 1 year ago.

Is his lack of work his choice?

Customer: replied 1 year ago.
He is awaiting a hip replacement op. So claims he struggles to work due to medical reasons. But post op 3 month recovery he has an earning capacity of £40-£50k pa.
Customer: replied 1 year ago.
Do I have grounds to vary the charging order?
Customer: replied 1 year ago.
Clare? It's taking a vet long time to get an answer...
Expert:  Clare replied 1 year ago.

My apologies I have been in Court all day

I am afraid that the Charging Order stands.

Any debts secured on the property survive the Bankruptcy - this is the point of obtaining one.

Accordingly I am afraid that it stands

However within the financial side of the divorce proceedings you can still seek and Order that your ex pays the debt albeit in installments

Given his earning capacity this is a viable request and would be your only way forward I am afraid

Please ask if you need further details

Customer: replied 1 year ago.
Thank you for your answer. I think I was confused because the FCO is considered a secure debt when there is no charge on my house to secure it. A form k restriction can be overreached if the house is sold to a third party and it would just become an unsecured debt again. Also how can it be fair that my equity decreases as this FCO increases at 8% interest. My STBX has no equity left in the house so where is this ongoing interest being paid from?
So if I want to take over the ownership of the house in my sole name I will have to pay the charge off on his behalf to allow the transfer to happen and then have it written into the court order that he pay me back in instalments - is that right?
Expert:  Clare replied 1 year ago.

Actually you raise an interesting point

Technically a Charge on a jointly owned property can only "bite" on the share owned by the debtor.

In your case at the time it was created there was no equity (which is why if you had objected it would not have been granted)

The Bankruptcy came very swiftly on the heels of the Order and again at that point it was still in negative equity so again it could not "bite"

on anything.

Since the date of the Transfer all the legal interest has been yours - although do be aware that since that point your husband may again have accrued an interest in the property by virtue of it being the matrimonial home - and indeed it could be argued that accordingly there is still an interest for the charge to relate to.

Despite that potential complication I would certainly try and have the Restriction lifted using the form here

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/547280/RX4.pdf

and send it with the supporting valuation and a copy of the TR1

If that fails then yes you will have to argue it within the financial settlement

Clare and other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.
Thank you so much for your help in this matter. It's really appreciated. Have a good day!