Case Study

Debt Management – A Bolt from the Blue

Mrs X had been happily married for two years. She and her husband were reasonably secure financially, but would not have been considered to be well off. One day she opened her mail and found a letter from a building society demanding immediate payment of £28,000.

Several years before and in an earlier relationship, and she and her boyfriend had bought a house together. The house and the mortgage had been in their joint names. When the relationship broke up, she left the house in the hands of her boyfriend. There was no formal settlement and the ownership of the house and the mortgage remained in both names.

Evidently the boyfriend had been unable to make the mortgage repayments and the house was repossessed and sold by the building society for less than the value of the mortgage. Mrs X had left a trail that made it relatively easy for the building society to trace her; the boyfriend had not. Under the rules of joint and several liability the building society were entitled to look to Mrs X for repayment of the whole of the shortfall and this is what they did.

Mrs X was distraught. It was impossible for her to pay the amount demanded and after unsuccessful attempts to negotiate, she thought her only alternative would be to be made bankrupt, which would have meant that  her interest in the house she now lived in with her husband may have to be realised.

Furthermore, it transpired that the mortgage had been the subject of an indemnity policy, against which the building society had claimed approximately £10,000, which had been deducted from the liability in arriving at the figure of £28,000. The insurance company also had a claim against Mrs X, but had not made one at the time we were consulted. Because of this Mrs X’s potential total liability was £38,000, none of which had arisen because of anything she had done.

Following negotiations with the building society and the insurance company we were able to agree a single payment in full and final settlement between them in the sum of £4,500.