Question: I'm days away from being made bankrupt after a messy and painful separation, but want to know if I'll ever be able to get a mortgage again? I know it won't be easy, but can I ever own a house again? PJ, Cardiff.
Answer: Bankruptcy's burden makes for an overbearing present day, so your willingness to look to a brighter future will hopefully lighten the load.
Yet make no bones about it, being made bankrupt is bad news. Most significantly, you'll be stripped of most, if not all, of your assets which are handed over to your trustee – usually the Official Receiver – in order to pay your debts.
"As part of your responsibilities, you must also hand over your bank and credit cards; you won't be able to borrow more than £500 without telling the lender you're bankrupt; and aren't allowed to manage a business without telling those you do business with that you are bankrupt," says a spokesman for the Insolvency Helpline (www.insolvencyhelpline.co.uk).
Your bank will freeze any accounts you hold and may refuse new ones. Critically, your ability to get credit will be curbed since reference agencies such as Experian and Equifax keep a record of bankruptcy for six years. Every time you want to borrow money, any judgment a potential lender makes will only come after it has read about your bankruptcy.
Despite these downsides, there are good grounds for optimism about owning your own home again.
Bankruptcy usually only lasts for 12 months from the date the court declared you to be so. And once you have been 'discharged' from it for at least a year, some lenders will consider a mortgage application.
"As an example, Nationwide will look at your position after 12 months while Accord – an arm of Yorkshire building society – will only do so three years on," warns David Hollingworth at mortgage broker London & Country. "Others such as Santander won't even look at you."
As for the likely mortgage rate, he says, you shouldn't have to pay a premium as an ex-bankrupt; if a lender is finally prepared to lend to you, it is usually at the market rates.
Ultimately, success will depend on your personal circumstances, adds a spokesman for broker John Charcol: "Your employment, the amount of deposit you can put down and the property you wish to buy."Reuse content