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Ash, Solicitor
Category: Bankruptcy Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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Can a bank request settlement from a non bankrupt partner for

Customer Question

Can a bank request settlement from a non bankrupt partner for joint and several liability arising on loss of a repossessed property where the bank has already lodged a claim with the trustee of the other three bankrupt partners? Hasn't the bank effectively written off the debt by lodging the claim in the three bankrupt's estates?
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  Ash replied 3 years ago.
Hello my name is ***** ***** I will help you with this.
When was this debt from please?
Customer: replied 3 years ago.

It arose on a property owned jointly by four of us. This property was repossessed after a couple of years from me dissolving the partnership due to non payment of mortgage. Sold middle of last year.

Expert:  Ash replied 3 years ago.
OK - did you provide a guarantee to the bank?
Customer: replied 3 years ago.

Ummm...when do(es) (an) individuals need to provide a guarantee on (his)/their own mortgage?? The property was purchased in 4 joint names (no limited company involved that would give the need for personal guarantees!!). This property was the trading premises of the partnership. I would imagine that we were joint tenants of this property - but when I dissolved to partnership which was disputed by the remaining partners, the court subsequently confirmed my dissolution and also confirmed that the property was a partnership asset. Does this indicate that we were tenants in common? The mortgage of the property was taken in our 4 names.

I also had a further query - the property was disposed of at nearly a quarter of the market value. Do I have any recourse because of the speedy disposal giving rise to a loss.My view is that the reserve price at auction was set too low, even though the LPA receivers were aware of a definite awaiting buyer, who in fact subsequently purchased at auction. I understand that the bank and the Receivers acted may not have observed their duty of care. My other partners definitely frustrated the sale of the property by entering into sham leases to tenants, without the banks permission, before the property was "repossessed". Neither the Receivers nor the Bank ever took possession of the property from my other partners. The Receivers were fully aware that the leases were a sham. Also the longest lease expired at the end of this year - all they had to do is wait to get possession to enable a proper sale.

Are my queries beyond your expertise?

Expert:  Ash replied 3 years ago.
No, that is fine.
The problem is this. All parties on the mortgage are joint and severally liable. This means even if there is a claim lodged with a trustee that does NOT write off the value.
Assuming the debt is £100,000 and they get back from the trustee £20,000. That still leaves £80,000 outstanding which can be recovered from the other parties as they are joint and severally liable.
The bank has 12 years to do this as this is the limitation for contract under a deed.
So to answer your question by lodging the claim does it write off the debt -no.
Each party is joint and severally liable.
As for the property being disposed of at a loss -no, that is the risk of auction.
I am sorry if these are not the answers you want and certainly not the one I want to give you, but I have a duty to be honest.
Can I clarify anything for you about this today please?