DTI denies push to repossess homes
The DTI has denied that it is repossessing as many bankrupts' homes as possible before new legislation comes into effect.
Link: Enterprise Act comes into force
The Enterprise Act means that, from 2004, creditors will have only three years to take action to sell a bankrupt’s house. Failure to act before the 2007 deadline will result in the chance being lost.
The change will end the existing system under which creditors can make repossession any time after the homeowner’s bankruptcy.
The Act benefits victims of negative equity from the early nineties, who went bankrupt but escaped repossession of their homes because they were worth less than was owed on them. As property prices rocketed, however, many built up sufficient equity to pay their debts.
Experts have suggested the DTI’s response to the looming April 2007 deadline has been to speed up the process of review, effectively causing the repossession of homes that would be safe under the new legislation.
Michael Gerrard, personal insolvency expert at Grant Thornton, said that insolvency practitioners had seen a marked increase in the number of cases arriving on their desks in recent weeks. ‘The risk of bankrupts losing their homes has been highlighted by an increasing number of bankruptcy cases being revisited by the DTI as a result of the introduction of [the Enterprise Act],’ he said.
He believed that not everyone would use the equity in their house to settle debts. ‘Many will be able to settle the score by way of remortgaging, but others could see their homes being repossessed,’ he added.
However, the DTI has denied the claims, saying: ‘Cases [involving negative equity] are being reviewed at the moment, but there has never been a schedule, there is no rush and no new unit has been set up to deal with them.’
It added that the measures would benefit bankrupts by creating a cut-off point to liability. Asked whether the remaining 8,000 or so cases would be reviewed before the deadline, the DTI said it could not comment.