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House Repossessed and Chasing Me for Debt – What to do?

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Scott
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Scott Nelson

Managing Director

MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.

Learn more about Scott
&
Janine
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Janine Marsh

Financial Expert

Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.

Learn more about Janine
· Feb 6th, 2024
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house repossessed and chasing me for debt

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Are you worried about a letter that says your house has been taken and you owe money? This can be scary, but don’t worry. We are here to help. This article is here to answer your questions and help you understand what to do. 

Many people are in the same boat. In fact, over 170,000 people come to our website every month for advice about debt.

In this article, we’ll help you understand:

  •  How someone takes your house if you owe money.
  •  How to deal with people asking for money.
  •  The steps that happen when a house is taken.
  •  How to make sure you have enough time to sort things out.
  •  How you might be able to get rid of some of the money you owe.

We know that getting a letter like this can make you feel confused and worried, as research shows 64% of UK adults find interactions with current debt collectors stressful1. You might wonder where the debt came from, or if you should pay it. You might even worry about what will happen if you can’t pay. 

Our team has gone through the same thing. We understand how you feel, and we’re here to help you figure out what to do if your house has been taken and someone is asking you for money.

Could you legally write off some debt?

There are several debt solutions in the UK, choosing the right one for you could write off some of your unaffordable debt, but the wrong one may be expensive and drawn out.

Answer below to get started.

How much debt do you have?

This isn’t a full fact find. MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

When can they repossess your house? 

The prospect of losing your home can seem entirely terrifying. However, it’s a fairly long process that has many different steps. So, even if you’re struggling to pay your mortgage, you might not get evicted immediately. The lender has to start court proceedings that follow a set process.

What Is the Repossession Process?

Understanding the repossession process may help make the process more transparent.

There is a set process for repossession that your lender needs to follow.

  1. You’re contacted about missed mortgage payments, and arrear negotiations can occur.
  2. Your lender starts court action if you can’t find a mutually beneficial repayment plan.
  3. You receive court paperwork.
  4. Possession hearing – you need to attend it or an outright possession order can be issued.
  5. Court decision published – this is either an outright order or a suspended order.
  6. Bailiffs can be used to evict you if you stay after the date of possession or if you break the terms of your suspended order.
  7. Sale – after you leave or are evicted, your lender can sell your home, usually at a property auction.

Outright vs Suspended Orders

A possession hearing can issue one of two court orders.

An outright order sets a specific date for your to leave your home. This can be anything from 4 weeks after the possession hearing.

A suspended order means that you can stay in your home as long as you stick to the terms that the court laid out. You will probably have to pay a set amount in addition to your normal mortgage payment.

But sometimes, a repossession order can be dismissed or adjourned.

You may even be able to get a second suspended possession order, provided you can provide proof that you can afford to make a small additional monthly payment. Take this example.

This is an undeniably heartbreaking example of home repossession that is no one’s fault. Fortunately, they may be able to benefit from advice from the National Debtline in the comments.

This is a great reminder that debt charities are there to help! I have linked several charities at the bottom of this page. You can contact them at any point in the repossession process for free debt counselling, support and advice.

In 2022, arrears on household bills increased by 68% from £1,739 to £2,9202, so you’re not alone in this situation.

How much notice do I have? 

It takes a reasonably long time for a lender to evict you from your home. For a start, they need to give you a reasonable chance to arrange any missed payments before they start proceedings. Once a lender starts proceedings against you, you’ll have at least 3 weeks’ notice of a judge reviewing your case. 

Your possession hearing could then take a while to schedule. The date depends on a variety of factors, which can give you time to sort things out. However, once a possession order is made against you, you could have as little as 4 weeks before you’re evicted. Once a lender has notified the bailiffs, it can take as little as 14 days for them to repossess your house. 

How a debt solution could help

Some debt solutions can:

  1. Stop nasty calls from creditors
  2. Freeze interest and charges
  3. Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:


Situation

Monthly income £2,504
Monthly expenses £2,345
Total debt £32,049

Monthly debt repayments

Before £587
After £158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

Get Started

What is a mortgage shortfall? 

After your home has been repossessed, your mortgage lender will then sell the property. However, there is a chance that you still owe money even after this process takes place. Usually, this means that your house is sold for an amount that is lower than your outstanding mortgage and any secured loans. This is known as a mortgage shortfall. 

Often, this leftover debt includes things like monthly instalments and interest payments added to your debt during the process. Unfortunately, until the house sells, you’re liable for these costs. In addition, you might be responsible for any legal and estate agent fees. 

Unsecured vs Secured Debts

When you take out credit, it can be secured or unsecured.

Secured debts have some sort of collateral attached. This could be a car, your property, or other valuable asset. This will be seized by your creditor if you default on your loan.

Unsecured debts have no collateral attached to them. This means that there is nothing for your creditor to take if you miss payments or default on payments. However, unsecured credit does require that you have enough positive credit history to meet your creditor’s standards.

From my experience, secured loans have lower interest rates because they have a lower risk – if you don’t pay, they can take your asset and sell it to cover losses.

Mortgages are always secured loans. This means that your property with the mortgage attached to it can be seized if you stop making payments.

Is There a Time Limit?

So, if your house has been repossessed and they’re chasing you for debt, you might be wondering how long they have to secure it. There are some time limits that apply to these debts, as outlined in the Limitation Act 1980. If your creditor has run out of time to claim the debt, you may not have to pay it, as it’s what’s known as statute-barred

However, the length of time on your debt depends on the type of money you owe: 

Mortgage Capital 

This is the money that you originally borrowed to purchase your property. Under section 20 of the Limitation Act, your lender has 12 years to contact the courts and make you pay any debt you have of this nature. 

Interest 

This is the interest on the mortgage capital you were charged to borrow the money. This interest can also apply after your home is sold. However, under the Limitation Act, your lender only has six years to pursue the debt. 

My House is Repossessed and They’re Chasing Me For Debt – What Should I Do? 

» TAKE ACTION NOW: Fill out the short debt form

So, if you’re in the unfortunate position where your house has been repossessed, and they’re chasing you for debt, it can be a scary thing to have to face.

There are some steps that you can take that can help you deal with the problem. Keep in mind that most debt solutions will not help with secured loans. However, they may help with your unsecured loans and free up some money for you to make your mortgage payments.

Debt Management Plan (DMP)

A DMP is an informal debt solution that lets you pay off your debts via a single monthly payment.

Because it is informal, it is not legally binding so you are not tied into a DMP for a minimum number of payments.

Individual Voluntary Arrangement (IVA)

An IVA is a formal agreement between you and your creditors. You agree to pay a monthly sum that is distributed amongst your debts, and your creditors agree not to contact you during your IVA.

IVAs typically last for 5 or 6 years, and any outstanding debt is wiped off when it ends.

Keep in mind that IVAs are not suitable for everyone. You need to owe several thousand pounds to more than one creditor to be eligible. You also need to demonstrate that you have some disposable income every month.

Trust Deed

IVAs are not available in Scotland. Instead, you will need to opt for a Trust Deed.

Trust Deeds work in the same way as an IVA – you pay an agreed sum each month that is shared amongst your creditors, they can’t contact you, and any leftover debt at the end of your Trust Deed term is written off.

Debt Relief Order (DRO)

A DRO is a good option for those facing financial hardship with no assets and little income.

For 12 months, you make no payments, but your creditors freeze your interest and don’t contact you.

If your finances haven’t improved during this year, you may be able to write off your unsecured debts.

Bankruptcy

If you have debts but no realistic possibility of ever paying them off, you may need to declare bankruptcy.

Bankruptcy has an unfair stigma attached to it as it may be your only way of getting a financial fresh start. That said, it is a serious financial situation that should not be taken lightly.

Sequestration

Sequestration is the Scottish version of bankruptcy.If you have little income and no valuable assets, you may be able to apply for a minimal asset process bankruptcy (MAP). A MAP is a quicker, cheaper, and more straightforward version of sequestration, so worth considering.

Make an offer 

One of the things you can do is negotiate with your lender. If you have a large mortgage shortfall and only a very small amount of income, you should explain this to them. They might agree to a repayment plan that helps you manage your debt better. In some extreme circumstances, tthey may agree to stop pursuing the debt, particularly if there’s little chance of you ever paying it back. 

If you cannot afford to pay this leftover amount, ask your lender not to pursue your mortgage shortfall using our free letter template.

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Other Debt Collectors to look for on your Credit Report

There are hundreds of debt collectors in the UK and they each collect for different companies.

It’s surprisingly easy to not notice that you’re in a debt collector’s crosshairs.


I’d suggest you spend time checking your credit report. If a debt collector purchases any of your debt, it will appear on your credit report.

Some of the biggest to look out for include Cabot, PRA Group, and Lowell.

So if you see anything relating to their names, then you’ll need to investigate further.

Getting help 

If you are struggling to manage your money or facing potential home repossession, I recommend speaking to a debt charity.

There are several charities and organisations in the UK that offer free debt counselling services and free financial advice. Their advisors will be able to walk you through your options and find the best solution for you.

They will also be able to talk, in detail, about your legal rights and the limitations of your lender. Shelter, in particular, will be able to give you the most updated house repossession laws and advice.

Could you legally write off some debt?

Answer below to get started.

How much debt do you have?

This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.

References

  1. InDebted, Debt Collectors Survey
  2. StepChange, Scotland in the Red
The authors
Scott Nelson Profile Picture
Author
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh Profile Picture
Debt Expert
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.