Bankruptcy of an individual is the only housing pledged. What will happen to mortgaged housing during bankruptcy?

Each person paying off a loan can, for a variety of reasons, lose this financial opportunity and fall into the category of debtors. The circumstances leading to this outcome negatively affect the borrower’s position and lead to the transfer of the case to the bailiffs. This problem is especially relevant for people who have a mortgage loan and live in a single home.

To avoid contact with government collectors, some people apply to the judicial authority to declare them insolvent. We will tell you exactly how this procedure is carried out and what will happen as a result of bankruptcy with a mortgaged apartment in our article.

Back in 2015, a completely legal way to resolve a situation related to the inability to pay money on a home loan or other financial obligations appeared. The bankruptcy procedure involves debt restructuring with subsequent freezing of interest accruals. In some situations, complete write-off of the debt or sale of the debtor’s property to pay off the total debt is considered.

According to certain provisions of the law, only a single apartment is not subject to sale, however, even here a citizen should remember a number of nuances. In particular, we are talking about collateral. The answer to this can be provided by the Federal Law “On Mortgage”, which states that the sale of living space pledged by the bank can be sold to offset an individual’s debt on a housing loan. The court may make a different decision, especially if the case involves the interests of a minor child, but this happens strictly on an individual basis. For example, if a home was purchased using maternity capital and part of the home, by law, is subject to transfer to the child in the future.

In other words, we can say that after a citizen is declared insolvent, the mortgaged apartment can be sold, and the money can be transferred to the creditor to pay off the debt. It is worth noting once again that until a citizen is officially declared bankrupt, the apartment cannot be repossessed and sold.

What options can a bank offer a citizen in case of mortgage bankruptcy?

Having found out that the rules of single housing do not apply to mortgaged apartments, it is worth studying this issue more carefully and finding another solution to the problem. It is no secret that most borrowers prefer to keep the apartment they have already purchased and try to find various opportunities for this.

The most suitable option in this case is to cover the difference between the already paid cost of housing and the total debt. Provided that the bankruptcy procedure takes a lot of time, the borrower has a real opportunity to collect the necessary money to pay for the housing loan. A procedure such as restructuring allows you to resolve the issue. In this case, the apartment can be preserved or sold at auction.

Most banks do not pursue the goal of taking away their last home from citizens and quite often make concessions. However, if the situation is very complicated and even during the restructuring process the debtor does not have the opportunity to repay the debt to the bank, the housing is seized and transferred for sale.

As a physical Is a person declared insolvent with a mortgage?

A mortgage debtor is declared insolvent by a court. To do this, the citizen will need to apply to the court with a corresponding application. Obtaining such status does not guarantee complete write-off of debts from the borrower, but, on the contrary, leads to the sale of property. This is due to the fact that banks prefer to return their funds through the sale of the apartment.

In some cases, an application to declare a citizen insolvent is submitted by a creditor. Under such circumstances, there is no question of saving the apartment. If a positive decision is made on the appeal, the bankrupt’s property is described and the mortgaged apartment is put up for auction. An important point is the cost of living space. As a rule, the price is determined by the judge, but if this parameter was not established during the trial, then experts are invited who are able to determine the real price of the residential premises. After the assessment, the cost is reduced by another 20%, and the housing is transferred for sale at auction.

The procedure usually does not take much time, and the auction can be opened if there are two participants. The one who offers the largest amount is declared the winner and receives the right to dispose of the apartment. If it was not possible to sell the premises the first time, then it is put up for auction again, with a price reduction of 15%.

Conclusion

Even if the mortgaged housing is the only one for the borrower who does not pay the loan, this does not give him any advantages. Today, judicial authorities have the right to seize such living space from debtors, provided that it is collateral for a housing loan. There are a number of nuances and some possibilities that still allow the borrower to keep such property, but even in this case it is necessary to act strictly within the framework of the law and the concluded mortgage agreement.

QUESTION: Good evening, I have a question about a co-borrower on a mortgage in bankruptcy.
On August 4, 2016, I was declared bankrupt. Until February 22, 2017, the sale of property (sofa, TV, chest of drawers, vacuum cleaner) is taking place. I did not include the mortgage, because... I am a co-borrower.
The husband pays the mortgage as a borrower without delays.
Now Sberbank is included in the register and issues a demand to the husband for full repayment of the mortgage. What to do in this situation?
And is this even legal? The arbitration judge is aware of the mortgaged apartment. Nevertheless, the decision has been made. And the bank is now demanding it from my husband. He's not going bankrupt.

It is not clear from your question whether this apartment is the only one, whether there are co-borrowers under the mortgage agreement, what is the loan amount, how long have you not paid the mortgage, what is the value of the mortgaged apartment, whether you have other property and other obligations to creditors.

MORTGAGE AGREEMENT AND SUBSIDIARY LIABILITY IN BANKRUPTCY.

Evgeniy Kovalev
managing partner For a more complete assessment of the situation, you need to look at the mortgage agreement. All relations between the bank, the borrower and the co-borrower are spelled out there, including the agreement must contain the following aspect - from what time the co-borrower is responsible for the borrower’s obligations to the bank. As for your situation.

Preliminarily, we can say the following: Your property is common (without defining shares) or shared property. The obligations assumed by your husband are also your joint and several obligations to the bank (creditor) by force of law. As for the legality of Sberbank’s demands for early repayment.

Obviously, the bank proceeded from the analogy of applying the provisions of the Federal Law on Insolvency (Bankruptcy) in relation to guarantors. Thus, the introduction of a bankruptcy procedure in relation to a co-borrower may indicate a deterioration in the terms of the security and be the basis for the creditor to file a demand against the main debtor for early fulfillment of the obligation.

In your case, we are talking about early repayment of the remaining amount of the mortgage debt. To talk about the legality or illegality of the bank’s demands, you need to study the mortgage agreement.

Regarding your question, you need to obtain the following information:

• Do you and your spouse have a prenuptial agreement?
• Is the mortgaged apartment your shared or joint property?
• For what purpose were the loans taken for which the property sale procedure is now underway?
• Which register is Sberbank included in?

How to solve your problem? First you need to conduct competent negotiations with the bank and provide evidence of your spouse’s solvency. If you cannot reach an agreement with the bank, I advise you to go to court with your husband and recognize the bank’s demands as unfounded and violating the terms of the agreement (if any).
Also provide the court with evidence of your husband’s solvency.
With proper preparation of all the necessary procedural documents and representation of your husband’s interests in court, this issue can be resolved.

Often, the insolvency of individuals affects not only the insolvent citizen himself, but also his close people. Divorce and division of property in the event of bankruptcy of a spouse are carried out according to a special procedure, which requires additional actions on the part of the wife or husband of the lender.

Common property of spouses in case of insolvency of a citizen

In accordance with Art. 45 of the RF IC, a man and a woman who are married are not liable for each other’s debts as long as the borrower has enough money to fulfill his obligations. When the defaulter's personal funds run out, foreclosure may be applied to the joint property acquired in the family.

In the event of the husband's bankruptcy, the wife's property will not be claimed until the man has enough money.

The specificity of the procedure for declaring citizens insolvent is that going to court occurs because an individual, including an individual entrepreneur, does not have enough funds to repay the debt. That is, one way or another, the wife should be prepared for the fact that the joint property will be included in the bankruptcy estate. A similar conclusion can also be drawn from paragraph 7 of Art. 213.26 of Law No. 127-FZ.

The most important questions that should be resolved during the trial: is the wife’s property taken into account in the bankruptcy estate during the bankruptcy of the spouse and what material assets are considered common?

In accordance with the provisions of the Civil Code, all movable things and real estate acquired during marriage are considered joint property, regardless of who is registered as their owner.

Property that is not recognized as common:

• a gift or inheritance received by a husband or wife;
• material assets defined as belonging only to a man or woman based on the consent of the parties, certified by a notary;
• personal items, except jewelry;
• purchases made before marriage.

The joint property of spouses in the event of bankruptcy of individuals is considered common until the contrary is proven

Thus, almost all the things of the husband and wife can end up in the bankruptcy estate.

What will happen to common property during bankruptcy proceedings?

For a long time it was believed that if one spouse went bankrupt, his or her husband or wife was not involved in the process. But now the legislator thinks differently. According to paragraph 7 of Art. 213.26 of Law No. 127-FZ, the joint property of a family couple is included in the bankruptcy estate and is subject to sale.

Part of the proceeds belonging to the debtor goes to pay off the debt. The other share is returned to the solvent spouse.

If the wife is bankrupt, the consequences for the husband may be as follows:

1. The couple took out a bank loan or other loan together. During the trial, the common property of the married couple is sold. Part of the wife's money goes to pay off the debt. If there are not enough funds, the husband adds his share to fulfill the obligation.
2. Spouses separately took out a loan or other loan, for example, after a divorce. If one of them is declared insolvent, the second is not obliged to participate in the repayment of the debt. He has the right to claim money after the sale of property at auction by filing a claim for division of property. This can be done during the period of marriage.

It would be useful to figure out how a former or current solvent spouse can take their own money and not be responsible for the debts of their other half. To do this, it is necessary to apply to the district court during the bankruptcy trial with a claim for division of property. The financial manager can also initiate the procedure in order to form a bankruptcy estate, since it is he who keeps property records and is responsible for satisfying the demands of lenders.

Sometimes ex-spouses think that if they managed to divorce before the bankruptcy case was considered, their joint property cannot be taken away. This is wrong. Until a court decision on the division of property is received, it is considered common.

Unfortunately, additional litigation only complicates the situation. In practice, getting your money back is not easy. The problem is the length of proceedings for the division of property.

By the time the decision comes into force, the common property can be sold and all the money can be used to satisfy the claims of creditors

Other ways to save the property of a solvent spouse

In case of bankruptcy of one of the spouses, the jointly acquired property of the spouses is allocated to personal property in the following ways:

1. By concluding a contract on the division of material assets between husband and wife. Is it possible to save property? In practice, drawing up a marriage contract and the bankruptcy process of a spouse looks very suspicious to a financial manager. In addition, the lender must be informed in advance about the execution of such a document, and this requirement is often ignored.
2. By selling property to third parties.
3. By concluding other transactions between each other or with other citizens.

Although such methods of releasing common marital property are quite legal, the husband and wife need to remember that the financial manager, in the course of his activities, will check for fraud with the property of the insolvent person. All transactions that were carried out within 3 years before the start of the judicial procedure can be challenged.

From the above it follows that the interests of creditors are so protected by law that the spouses will most likely have to part with their joint property.

What property is subject to sale?

All property owned by the debtor will be sold. If the financial manager determines that it is not enough to fulfill obligations to creditors, he includes the joint material assets of the spouses in the bankruptcy estate. The following property cannot be seized and sold:

• residential premises that are the only possible place for the bankrupt and his family to live (except for collateral real estate);
• land plots on which the borrower’s only housing is built;
• household items;
• animals and agricultural products not used to generate income;
• food and a small amount of money for current expenses;
• means of transportation for a disabled person;
• awards and prizes;
• fuel.

The debtor's real estate is subject to recovery if it is not the citizen's only place of residence.

Can spouses go bankrupt together?

The responsibilities of husband and wife are often joint. Therefore, a situation of simultaneous bankruptcy cannot be ruled out. Some lawyers insist that this is a fairly convenient mechanism for declaring insolvency. Its advantage is that it saves money on a financial manager, because one specialist will work, not two.

In case of simultaneous bankruptcy, one register of creditors' claims is compiled, there is a single priority for satisfying the claims of lenders, and in the event of a shortage of property, all debts of the spouses are written off.

If a husband and wife have something to lose, but insolvency is inevitable, you can try one of the following schemes:

1. Carry out a transaction involving the alienation of the main property to a loved one (preferably not a relative). The amount in the agreement between the parties must be market, although the agreement may essentially be fictitious, without the transfer of money. At this time, you need to pay off your debt regularly.
2. Wait a while. Six months to a year is enough. In this case, it is advisable to pay off the debt.
3. Declare your insolvency.
4. The remaining property will be sold. Debts have been written off.

There are many reasons why experts insist on this scheme. As long as the spouses repay their debts regularly, it is very difficult to challenge their transactions. The husband and wife will not have common property. Thus, they will remain with the property (supposedly sold), they will be declared insolvent, and there will be no debts left after the bankruptcy procedure.

What jointly acquired property can be sold in the event of bankruptcy of one of the spouses, see below:

Attention! Due to recent changes in legislation, the legal information in this article may be out of date!

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Good afternoon. I have an apartment mortgage contract drawn up for an individual, I have been paying for 2.5 years, now my salary at work has been significantly reduced (my salary + interest), I can’t pay the mortgage, what will happen? Will the bank take the apartment? Is it possible to save an apartment during bankruptcy?

Rule: Mortgage housing is property that, in the event of bankruptcy of an individual, will be sold, the apartment will be assessed by the financial manager and put up for public auction and sold.

IS A MORTGAGE YOUR ONLY HOUSING?

Evgeniy Kovalev
managing partner It is not clear from your question whether this apartment is the only one, whether there are co-borrowers under the mortgage agreement, what is the loan amount, how long have you not paid the mortgage, what is the value of the mortgaged apartment, whether you have other property and other obligations to creditors.

If the apartment is mortgaged and this housing is the only one, according to the law (Article 446 of the Civil Code of the Russian Federation), foreclosure on the only housing is not allowed, however, a mortgaged apartment is an exception. The property will be sold at auction; if this is the only housing, then the right to use will be retained. That is, the apartment will be sold “together with the residents.”

Whoever buys it will have to deal with the eviction on their own. Accordingly, the cost of such an apartment with such an encumbrance will be significantly lower than the market price.

I can't pay my mortgage - what will happen?

If the cost of the apartment is more than the mortgage debt.

The bank will wait, remind you of itself with calls and SMS, threaten with bailiffs, but will not sue until a sufficiently large amount of fines and penalties, comparable to the cost of the apartment, accrues.

The bank will go to court, and the judge will decide to foreclose on the apartment.
A writ of execution will be issued, according to which the bailiffs will sell the apartment within 4-6 months.

The selling price will be set after attracting an appraiser who will determine the value of the property, then the apartment will be sold at auction.
In practice, the sale price may be significantly lower than the market value of the apartment.

• interest, fines, penalties for overdue periods;
• repayment of principal for overdue periods;
• repayment of principal and interest for the current period.

Thus, by delaying going to court, the bank will receive the maximum possible amount from the debtor.

If the cost of the apartment is lower than the debts under the mortgage agreement.

Typically, the mortgage agreement has a clause under which, if the value of the collateral decreases below the balance of the debt, the bank has the right to demand additional security under the loan agreement or early fulfillment by the debtor of its obligations to repay the debt.

And if the debtor does not pay, and this situation is very typical with foreign currency mortgages, the bank, having gone to court and received a writ of execution, sells the mortgaged property through the bailiffs.

The apartment will be sold, the debts will not be repaid, other property (car, land, dacha) will be described by bailiffs and seized.
And so on in a circle until the debt is completely repaid.

What's the solution?

Carrying out bankruptcy with a mortgage.

The debtor will lose the mortgaged apartment in any case.

If the cost of the apartment is less than the loan amount, there is no other option but bankruptcy to minimize your debts. Also, if the apartment is at the stage of sale, but has not yet been sold, using the bankruptcy mechanism you can significantly reduce financial losses when selling a mortgaged apartment or delay the procedure for a long time, while remaining living in the mortgaged apartment.

Declaring a borrower bankrupt means stopping the accrual of interest and fines to the debtor, including under a mortgage agreement.

The bank will not submit an application to declare the debtor bankrupt if the citizen has a mortgage.

Why is this not profitable for the bank at all:

• All costs of conducting the procedure are borne by the initiator - in this case, the bank;
• From the moment the court accepts the application, penalties, fines and interest are not accrued - and this is the main income of the bank;
• The process of selling mortgaged real estate may be significantly delayed - which is not in the interests of the bank;
• The sale of the debtor’s property is a non-core activity for the bank;
• During bankruptcy proceedings, the right to dispose of the debtor's property, including mortgaged real estate, passes to the financial manager.

The arbitration manager can re-evaluate the apartment, re-put it up for auction, and this procedure can take much longer than with the bailiffs. In this case, a citizen can challenge the assessment, petition for another assessment, and this period can last for a year or even 2, while the accrual of fines, penalties and interest on the mortgage is stopped

You can carry out an independent redevelopment of the apartment, then try to legalize it for a long time or use other legal methods of delaying the sale of mortgage housing.

The period can be extended to 4 years. Legal.

Evgeniy Kovalev
managing partner No interest is paid, no fines or penalties are accrued. Next, you can try to save your apartment by buying it through third parties.

Also, as part of such a bankruptcy procedure as property restructuring, there are also mechanisms to preserve the mortgaged apartment.

To make a decision on bankruptcy with a mortgage, you need to carefully weigh the pros and cons of such a decision; perhaps you will be able to restructure the debt, find other options for resolving the mortgage issue, but if the situation is urgent, before filing for bankruptcy of an individual, call and consult regarding your problem with a bankruptcy lawyer or send a request using the feedback form.

We will try to help you.

The formation of a bankruptcy estate in bankruptcy cases of citizens is complicated by an important circumstance - if the debtor has ever been married, his property may in fact be jointly owned by the spouses. At the same time, the understanding of the common property of spouses, developed by the Plenum of the Supreme Arbitration Court in cases of bankruptcy of individual entrepreneurs, was not accepted by the legislation on bankruptcy of individuals and is noticeably at odds with the legal positions of the Judicial Collegium of the Supreme Court in civil cases.

Lawyer, partner of the Moscow Bar Association “Barshchevsky and Partners” drew attention to this in his research. His article “Joint property of spouses: problems of forming the bankruptcy estate of a bankrupt citizen”, published in the December issue of the magazine “Zakon”, is posted in the Library Zakon.ru.

The Plenum of the Supreme Arbitration Court proceeded from the fact that the common property of spouses in the event of bankruptcy of one of them (as an individual entrepreneur) is not included in the bankruptcy estate. The bankruptcy trustee could apply to the court with a demand for the division of the common property of the spouses, and only after the allocation of property due to the share of the debtor spouse, such property was included in the bankruptcy estate (clause 18 of the Resolution of the Plenum of the Supreme Arbitration Court dated June 30, 2011 No. 51 “On the consideration of cases on bankruptcy of individual entrepreneurs").

But for the bankruptcy of individuals, the legislator chose a different approach - the common property of the spouses is subject to sale in a bankruptcy case of a citizen. The bankruptcy estate includes part of the funds from the sale of the common property of the spouses, corresponding to the share of the citizen-debtor, the rest of these funds is paid to the spouse (or former spouse) of the debtor (clause 7 of article 213.26 of the Federal Law of October 26, 2002 No. 127-FZ “On Insolvency” (bankruptcy)").

In other words, the Bankruptcy Law actually introduced a procedure for the forced sale of the property of a spouse who is not a debtor. It will probably help to form the bankruptcy estate of bankrupt citizens as quickly and completely as possible, protecting the interests of creditors. However, if it is applied without attention to the interests of conscientious spouses of debtors, such a procedure can cause a lot of harm to the rights of this category of citizens.

At the same time, the Plenum of the Supreme Arbitration Court allowed the use of another mechanism for “filling” the bankruptcy estate of the debtor-entrepreneur. The bankruptcy trustee had the right to assume that the property belonged to the debtor, if the movable thing was in the possession of the debtor, the immovable thing was registered in the Unified State Register as the property of the debtor, and the property right (for example, the right of claim, exclusive right, share in the authorized capital of an LLC) was recorded with indicating the debtor as the sole copyright holder. Such property was included in the bankruptcy estate. In this case, the spouse (former spouse) of the debtor, who disagreed with the actions of the bankruptcy trustee, could file a claim in court for the division of the spouses’ common property and the allocation of property due to his share, or demand recognition of the right of common ownership of such property (clause 18 Resolution of the Plenum of the Supreme Arbitration Court of June 30, 2011 No. 51).

However, according to paragraph 1 of Art. 34 of the Family Code, property acquired by spouses during marriage is their joint property. In this regard, in the practice of the Judicial Collegium of the Supreme Court for civil cases, a presumption of the regime of common joint property of spouses has been established in relation to property acquired during marriage:

“...[T]he right to common property acquired by spouses during marriage belongs to both spouses, regardless of which of them and in the name of which of them acquired the property (contributed funds) or issued a title document. In the event of a dispute, any of the spouses is not required to prove the fact of community of property if it was acquired during the marriage, since by virtue of the law (Clause 1 of Article 34 of the RF IC) there is a presumption that the specified property is the joint property of the spouses. Otherwise, it may be established by the marriage contract of the spouses (clause 1 of Article 33 of the RF IC)” (Determination of the Supreme Court of the Russian Federation dated September 23, 2014 No. 4-КГ14-20).

The approach of the Judicial Collegium of the Supreme Court in civil cases in this matter is apparently much closer to the meaning of the law than the legal position of the Plenum of the Supreme Arbitration Court.

Finally, we must not forget that the obligations of spouses can also be common. What to do if married citizens are unable to fulfill common obligations, and all property that can be foreclosed on is their common property? Is it possible in this case for joint bankruptcy of spouses (procedural participation of debtor spouses in a bankruptcy case)?

Although the legislation on bankruptcy of citizens does not provide for such a possibility, law enforcement practice has already shown that such a mechanism may be in demand.

In one of the cases, the Arbitration Court of the Novosibirsk Region declared both spouses bankrupt at once. At the same time, the court took into account the community of property and obligations of the spouses, and therefore allowed the formation of a single register of creditors’ claims and a single bankruptcy estate. The initiation of two separate bankruptcy cases, as the court indicated, will only lead to an increase in legal costs for bankruptcy procedures and disputes about which particular bankruptcy case to sell the joint property of the spouses (see Decision of the Court of Justice of the Novosibirsk Region dated November 9, 2015 in case No. A45-20897/2015).

Obviously, the legislator should pay attention to this gap in the law and determine the conditions under which a single case of bankruptcy of spouses can be initiated.