What to do if your mortgage lender starts court action
How to prepare for a hearing
Coronavirus update: repossessions are on hold
The Financial Conduct Authority has said that mortgage lenders shouldn't start or continue court action for repossession until at least 31 October.
That means they must not go to court for a repossession order or ask bailiffs to evict you.
You can ask your lender for support if you're struggling because of coronavirus.
You have 3 to 8 weeks from when you get the court paperwork until the hearing.
You need to:
- look through the court forms
- speak to a debt or housing adviser
- work out a plan to repay the arrears if you can
- decide what to ask the court if you can't afford to stay in your home
Check the court paperwork
You should have received the following court forms:
The claim form tells you the date and time of the hearing. Make sure you keep the day free and arrange childcare if you need to.
The particulars of claim form contains the details about your mortgage and the missed payments. Read through this information carefully. Make a note if there's anything you disagree with.
Use the defence form to provide the court with information about your financial situation and dispute anything you disagree with. You should return it to the court within 14 days.
You should still attend the hearing if you don't return your defence form. But it's good to provide clear information in advance as the hearing is often very short.
Contact an adviser
If you haven't done so already, now is the time to get debt advice.
A debt adviser can look at options to:
- increase your income
- reduce your spending
- prioritise your debts
They can help you draw up a financial statement and make a repayment plan.
You can also get legal advice on repossession if you qualify for legal aid.
Make a repayment plan
The judge will usually let you stay in your home if you can show that you can pay both:
- your monthly mortgage payment
- a set amount each month until you clear the arrears
Your financial statement should give a full picture of your income and spending including other debt repayments.
Gather evidence of the figures you use in the financial statement. For example: pay slips, energy bills and bank statements.
The plan needs to show that you have enough income left over every month to pay a regular amount towards the arrears until they are cleared.
Work out a minimum payment towards the arrears
In most cases, you need to show that the arrears can be cleared by the end of the mortgage term.
How to calculate a minimum payment offer:
Amount of arrears ÷ number of months until mortgage end = minimum payment
Example: You have £3000 arrears and have 10 years (120 months) until the end of your mortgage term. You could offer £25 a month towards the arrears.
This is the minimum payment a court can usually accept in order to stop the repossession going ahead.
It's better to repay the arrears sooner in larger instalments if you can afford to do so.
Keep talking to your lender
You should continue to talk to your lender about your financial situation even if they've started court action.
Let them know if anything is due to happen that could improve your situation. For example:
- finding a buyer for your home
- starting a new job or getting paid by a customer
- lump sum payments because of redundancy or inheritance
- getting benefits or support for mortgage interest (SMI) payments
If you come up with a reasonable repayment proposal, put it in writing to your lender before the court hearing. They may still want to go to court to make sure you stick to it, but they must treat you fairly.
Make a formal complaint if your lender won't talk to you or rejects reasonable proposals to deal with the arrears.
You can complain to the Financial Ombudsman Service (FOS) if you're unhappy with the lender's response. The court can delay the hearing while they wait for the FOS to consider the complaint.
If your mortgage is unaffordable
It may not be possible to keep your home in the longer term if you:
- can't afford the monthly repayments
- won't be able to clear the arrears by the end of the mortgage term
Some homeowners choose to sell their homes in this situation rather than wait for repossession and eviction.
If you accept an offer on your home, you could ask for time at the hearing to allow the sale to go through.
Last updated 31 October 2019 | © Shelter
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