Scotland, like every other part of the UK, is feeling the strain of the ongoing recession. Around 7,500 Scots – or 20 per day – are expected to lose their homes this year. It has been claimed that homeowners living in Scotland are more vulnerable than other parts of the UK to repossession, as the new pre-court action protocol, introduced in November, does not apply to Scotland.

The protocol, covering England and Wales, states that lenders have to negotiate with borrowers before court action is undertaken, thus protecting vulnerable homeowners from the aggressive tactics employed by some lenders when their customers fall into arrears.

If you live in Scotland and are facing repossession, try not to worry; if you seek help as soon as you begin to struggle with mortgage repayments, your lender is much more likely to help you. You may qualify for a payment holiday on your mortgage, or your lender may allow you to switch to an interest only mortgage until your finances improve.

If you run up substantial arrears and are overwhelmed by the situation, contact an advisory organisation such as Shelter Scotland or the Citizens Advice Bureau, or seek the advice of a legal aid solicitor

Repossession in Scotland is different from that in England and Wales, and the following is a brief description of the Scottish repossession process:

There are three main ways a lender can begin repossession proceedings:

1.      By serving a calling-up notice, giving the homeowner 2 months to clear their arrears. If arrears are not cleared within this period, then the lender can sell the property without going to court. If the borrower refuses to leave the home, then an action for repossession allows lenders to evict

2.      By serving a default notice, which gives one month’s notice to clear arrears and details of any repossession and power to sell

3.      By issuing a certificate with the court, if a mortgagee misses mortgage payments (legally known as ‘proceeding on the debtor’s default of standard condition 9 (1) (b) of the standard security (ie the mortgage)). The certificate will provide proof of arrears.

Although homeowners in Scotland are not covered by the pre-action protocol, they are afforded some protection by the Mortgage Rights (Scotland) Act 2001. This allows those affected by repossession to apply for suspension of enforcement action, giving them extra time to repay any mortgage arrears. The suspension of enforcement is known as a section 2 order and also applies to any loans secured on a property.

A section 2 order can only be applied for on properties used for residential purposes, and where it is the owner’s main residence – it does not cover holiday homes or second homes. There are 4 groups of people who may apply for an order:

1.      The debtor or owner

2.      The spouse of the debtor/owner, if they live in the property as a matrimonial home

3.      The partner of the debtor/owner (this includes same sex relationships)

4.      The ex-partner of the debtor/owner (if the relationship lasted in excess of 6 months, the debtor has left the home, and the debtors’ child(ren) live within the home (stepchildren included)).

If a calling up notice is served, an application for a section 2 order must be made before the calling up notice expires. If you receive a default notice, then an application must be received no later than 1 month after the period as set down in the default notice. Where proceedings are raised under sections 24 of the conveyancing act and section 5 of the heritable securities act, an application must be received before the conclusion of the court case.

If you are fighting repossession in Scotland, it is always best to file a section 2 order as soon as possible, and you can obtain one

1.      by way of summary application procedure (if served with a calling up or default notice)

2.      by applying to the sheriff, where a lender has begun enforcement proceedings in the sheriff’s court

The granting of a section 2 order is at the discretion of the sheriff, in accordance with whether the court considers the circumstances reasonable. The following criteria are taken into account:

• Reasons for default
• A debtor’s ability to fulfil the conditions of their mortgage within a reasonable period (determined by a case’s circumstances)
• Whether the debtor can reasonably secure alternative accommodation
• Mortgage to Rent application pending
• If the property is actively being marketed for sale

If an order is granted, any enforcement action will be suspended as seen fit and a creditor cannot take further action whilst the section 2 order is in force.

The court, however, does have the power to change or revoke an order if so requested by either lender or debtor; for example, if a debtor does not stick to the terms of the order, it may be revoked. Similarly, if a homeowner suffers a drop in income, they too may apply to court to request a variation of the order.

If you live in Scotland and fear repossession, contact a solicitor, Shelter, a law centre, or the Scottish Legal Aid Board in the first instance – they will be able to offer you (free) invaluable advice regarding what your next course of action should be. The Scottish legal aid board does NOT offer legal advice, but can explain the legal aid process.

Graeme Brown, director of Shelter Scotland, comments:

“Every repossession is an individual tragedy. If you are struggling with arrears, getting help as early as possible is the key to keeping a roof over your head. We would urge anyone facing housing issues to seek independent, impartial advice as early as possible. Call the Shelter Scotland helpline on 0808 800 4444 or go online for advice at shelter.org.uk/get_advice“.

Remember – the sooner you seek help, the better your chances of holding onto your home.

- Six Steps to keeping your home:

1.    Sort out your budget – If you’re feeling the pinch, take a look at your financial situation and see if there’s anything you can do to improve it. Ask yourself:
.    Can I cut back on spending without hardship?
.    Can I get a better deal on my mortgage, insurance, utilities or other essentials?
.    Is there anything I can do to increase my income? Can I claim any benefits, increase my hours at work or take in a lodger?
An adviser at a Citizens Advice Bureau or money advice centre can help you work out a budget and claim any benefits you may be entitled to.

2.    Don’t ignore the problem – If you receive a letter from your mortgage lender, don’t shove it to the back of a drawer. Get advice instead! Visit your local CAB or money advice centre, or call Shelter’s helpline.

3.    Talk to your lender – If something goes wrong and you can’t meet your monthly mortgage payments in full, you should tell your lender immediately. It is really important to contact your lender!

4.    Pay what you can – Even if you can’t afford your entire monthly payments, show that you are willing to pay what you can. If your lender knows you are trying to pay off your loan, they should allow you more time to sort out your money problems.

5.    Find out what your options are – Repossession should be a last resort for your lender, and they ought to consider ways to prevent it happening. For example, you could decide to sell your home yourself, or apply for a debt payment programme or the Scottish Government’s mortgage to rent or mortgage to shared equity scheme or the UK-wide homeowners mortgage support (HMS) scheme. An adviser at a CAB, money advice centre or at Shelter will be able to help you look at all the options.

6.    Make the right decision for you and your family – Before you and your lender agree on any changes to your mortgage, ask your lender to tell you about the longer-term implications of what’s proposed. Get advice before making any choices.

How do you stop house repossession? You are given plenty of opportunities to turn things around and stop home repossession during the process. As the homeowner, you have certain rights. But you also have important responsibilities.

Taking your responsibilities seriously and acting promptly to make the best of a nasty situation will stand you in good stead with both your lender and the legal system.

This is a quick guide 7 ways to avoid repossession

Follow our useful hints, tips and advice. Learn what steps you can take to dig yourself out of trouble and find out how to avoid repossession.

Stop house repossession – ask people who know what’s what.

You need to be informed, this website is a great starting point but we always suggest that you start talking to the people who count. Talk to your bank and also to professional organisations.
The Citizens’ Advice Bureau is one organisation that can give you free, impartial advice about how to avoid repossession. Search online for your local office, or try the ‘phone book. Plus, there’s the Consumer Credit Counselling Service.

Citizens’ Advice Bureau: CitizensAdvice.org.uk
Consumer Credit Counselling Service: cccs.co.uk

How to stop repossession – face your problems head on

You know what problems are like. Leave them and they get worse. It might feel good to stick your head in the sand for a while but if you want to stop house repossession it isn’t the most intelligent strategy.
The moment you realise you’re having problems making your mortgage repayments, get in touch with your lender. Answer their letters, and go and see them face to face if you can. There will be a real person in charge of sorting out your mortgage arrears. Find that person. It might not be easy but start calling the bank and make sure you write down all contact you have with them, including dates, names, numbers, office and team they work in. Keep a record of all this, you will be amazed how useful this is, if nothing more to say “Sorry John, that’s not helpful, I have been told that by Kate and Sam from the Repossessions team, can I speak to a manager please?” I have seen this in action, they are usually small teams and they all know each other.

Make this issue a problem for a specific person at the bank, keep referring back to them. If its their problem they will work on it. If you keep getting bumped from person to person you will never get any results.

The banks are not all evil money grabbers, they want to avoid repossession just as much as you want to keep your home. They might suggest that you switch from a repayment mortgage to interest only, or take a payment holiday, or increase the time you take to pay it off. Whatever happens, at least you’ve put them in the picture. It might be a good idea to follow up phone calls to the bank with letters outlining what was discussed. This may sound time consuming but could be a good idea in the long run and get a better response. Keep a copy for yourself, it may come in useful in court one day!

Not so long ago, you might have been able to re-mortgage easily enough. Thanks to the credit crunch, the likelihood is now slim. A vast number of mortgage products have been taken off the market in the past 18 months and the required deposit has increased dramatically, at the time of writing, you could not get a good mortgage interest rate for less than 20% deposit or equity in the house. In the summer of 2007 you still could get 95% mortgages. But all the same, talk to an Independent Financial Advisor (IFA) to see if they have a suitable option to help you stop house repossession.

You might also want to have a chat with a good mortgage broker, try to avoid companies that employee sales staff that just plug your details into a computer and spout out what they see on their screen. Normally young people with little or no real life experience in mortgages themselves.

Good mortgage advisors have usually been in the market for 5+ years and understand that there are ways and means of arguing for better rates, discounts in fees and mortgage holidays. For example, some professionals, teachers, policemen and firemen can get discounts. Like anything, you can actually negotiate your mortgage, don’t expect to get much off, but anything is better than nothing.

The bottom-line is start communicating with your lender, contact a free professional body, talk to mortgage brokers and make sure you draw up a timeline outlining you exact financial position.

You can easily find a suitable IFA online. Try: searchifa.co.uk and ifa-guide.co.uk or consult the phone book.

Stopping repossession – can you save money by cutting back a bit?

How to stop house repossession? One good way to make a dent is to get intimate with your bank statements. If you pay by direct debit, you might find a few DDs that you can cancel to save money. Perhaps you could swap your luxury satellite TV package for Freeview. There are loads of small ways to save cash that, together, can add up to an impressive monthly sum. It might make all the difference. Here is a great list of 50 ways to save money, Thisismoney.co.uk/50ways

Maybe start shopping at a cheaper supermarket, get no name food instead of brand names. If you are a smoker or drinker or both, add up what you spend per month on that (truthfully!) you might be surprised at the cost. Maybe you could halve that cost by buying a cheaper product, going to a cheaper pub or simply, god forbid… cutting back. Go for a walk or run instead. Clear the mind and keep the pennies.

While you’re at it, check that your statements are accurate. Even banks make mistakes and you could discover spare money you didn’t know you had.

Get a second or third job – Obvious we know, but it could be the key.

Yes, it means more work but at this point it is clear you probably need more money. Without the luck of inheritance or the lottery the most basic way to make more money is to work.

If you can’t manage to get overtime at your current place of  work then maybe all that’s required is one night a week at the local supermarket, or help the local milk man or baker out in the morning. Just two nights a week at 5 hours per night at the current minimum wage of £5.73 would gross £248 per month.  Many security guards get nearly double that, or how about baby sitting?

Many people have children to look after or can’t afford to travel to work. Maybe you should look for a job online? You could sell your skills at elance.com (worldwide) or peopleperhour.com (UK based) – a good UK based copy writer should be able to get at least £15 per 500 words, excellent copy writers charge up to £75 per 500 words! English people are preferred for much work as they usually have excellent English skills when compared to someone from Eastern Europe or India. There are a myriad of skills people have, why not look to get extra cash selling yours and in the process stop your house being repossessed.

Talk to your bank and cut bank charges

If you’re overdrawn, which is likely if you’re facing repossession, your bank will probably be charging overdraft fees.

You’ll know from recent publicity that where bank charges are concerned, the people who shout loudest get what they want. Get in touch with your bank and negotiate your bank charges down to the lowest possible level. Threaten to leave or explain your charges would be a lot less at bank X. Explain that they can help you keep your home if you work at it together. They’ll probably be glad to help, as they like to avoid bad publicity and keep customers happy.

You could think about rolling up all your non-mortgage debts into one loan, which can help lower your monthly outgoings considerably… another good way to help stop house repossession.

Keep paying no matter what…

Even if you pay your mortgage lender a small amount every month, it’s better than nothing. You’re showing that you are honestly committed to putting things right. Behaving openly and honestly does more than almost anything else to improve your chances of negotiating throughout the process and stopping repossession.

Beware of people who take advantage

Think twice before signing up to a quick fix. If something seems too good to be true, it probably is. There’s no easy way out, so always read the small print and take independent advice. There is a large advertiser on the Internet that offers such a quick fix… at 1845% APR, that is not a misprint, their interest rates are out of this world.

If you’re using an Independent Financial Advisor, make sure they’re registered with the FSA (Financial Services Authority), which regulates the UK financial services industry and gives you protection as a consumer. In short, watch out for sharks.

Visit the Financial Services Authority website: fsa.gov.uk
Find more useful guidance at easyhousedirectory.co.uk and repossession-stopper.co.uk

Mortgage Payment Protection Insurance

Many homeowners buy mortgage protection insurance as an integral part of their mortgage offer, and soon forget they’ve got it. Nobody is going to remind you, so check if you’re insured. If so, check whether you can make a claim. Insurance companies can sometimes be reluctant to allow claims, and staff members are not always experts in what’s covered and what isn’t. So be persistent and make sure you get the full facts before you give up.

Claim benefits

If you do qualify it may be to your advantage to claim benefits. The UK benefit system is complicated. But it is worthwhile contacting social services to see whether you’re entitled to financial support.

Try every way you can think of to raise cash
Now’s the time for creative thinking. You’ll probably have been worrying about how to avoid repossession for weeks, even months. So get some help and a  fresh perspective… ask around if there is any additional work from colleagues or look in the local paper. At this point in your life you need to lock down the spending and make as much money as you can.

Perhaps you could let your garage to a commuter, parking spaces can be worth good money, take a look here to see what they are worth in your area: ParkLet.co.uk.

Or rent out a bedroom to a student. You might even be able to let your place and rent somewhere smaller, making a profit which will pay your arrears. This can be an excellent money maker, maybe you could enjoy a smaller place that’s further out of the city or from where you work and let your place and profit the difference. Think of it as a holiday… maybe somewhere in the country? Try the Gumtree.com

Remember to get your lender’s permission if you do any of these, some mortgage contracts exclude them.

Sell your home yourself

If you sell your home yourself, you’ll get a better price for it. This is true in nearly every case. But there are varying degrees of selling ‘yourself’ and using agents is usually the best method. Agents buy advertising in bulk, have shop fronts and mail lists and will normally sell your place better than you could by yourself. Most people who advertise and sell their property 100% by themselves think they are saving on the agency fee, the problem is so does the buyer and they expect a discount. Sale by owner can work but in general the statistics show it is not a good option. You are better off negotiating a lower commission fee from a hungry sales agent. Also try to avoid using multiple estate agencies, you get two signs outside your house, you confuse the buyers and most importantly neither of your agents give your house priority and therefore it’s a case of two ‘half jobs’ and not one agent gives it their full attention.

The obvious way… avoid repossession. Simply, make sure that you sell your own home rather than letting your lender take over the process through repossession. To give yourself the best chance of selling fast, keep on top of your estate agent and insist on being fully involved in the process. This way, you make sure everything possible is being done to sell your property quickly, at the highest price. Make sure you keep tabs on the market and watch other similar houses for what their asking price is or what they sell for, if time is important, which it probably is then make sure you price your house or flat very competitively. If the one down the street is the same but cheaper… then you NEED to drop your price. You need a sale in good time so act accordingly, this is not a time to be greedy!

Click here for more Quick Sale information

Be your own solicitor – We don’t advise doing this unless you have some experience.
To make the biggest possible saving, carry out your own conveyancing as well. There are good books available on the subject and the process isn’t complicated, just time consuming. If you have the time, it’s worth a go. Try amazon.co.uk for books about how to sell your own home or  mypropertyforsale.co.uk for detailed guidance.

Don’t hand in your keys

Never just hand your keys in to your lender. It is one of the worst things you can do and, once you’ve stopped being relieved, you’ll be horrified at how the debts continue to mount. You’ll still be responsible for your mortgage repayments plus your buildings insurance and all sorts of other costs until they sell your home. And where will you live?

So, how to avoid repossession? Take all the individual options we’ve mentioned here. And anything else you can think of. Fight to keep your home. Make the choice to be honest and prompt in your dealings with everyone, and take every opportunity that comes your way, and you stand a chance of avoiding home repossession.

If you have some more tips the community would love to hear from you. Please let us know below.

What is an IVA?

You don’t have to sit back and let your home be repossessed from under you. You can take action. It is possible to prevent repossession by arranging an IVA, or Individual Voluntary Arrangement. An IVA helps you restructure your debt repayments, making it easier for you to handle them comfortably.
While it is wiser to arrange an IVA as soon as possible after you run into financial trouble, IVAs are often used as a last resort to stave off repossession at the last minute.

There are several ways to stop house repossession in its tracks and delay the proceedings, giving you a valuable breathing space in which to voluntarily rearrange your finances:

1. Pay an insolvency practitioner, who can apply for an Interim Order on your behalf. This can give you the extra time you need to review your overall financial circumstances and propose an IVA to your creditors.
2. A judge can issue a ‘Suspended Possession Order’ in Court. This lets you pay your mortgage arrears off in a structured, controlled way over a sensible time period.

3. In some circumstances you can include mortgage arrears as a debt in your IVA, although this isn’t common practice.

4. A good mortgage broker might even be able to find a new mortgage lender who’s happy to take on your arrears as part of a new single mortgage payment. This would be based on the usual lending criteria as well as the amount of money your home is worth.

It is often best to take control your financial situation yourself via an IVA than let control slip through your hands because of repossession.

Free IVA calculators: trapped.co.uk and NationalDebtRelief.co.uk

Can I apply for an Individual Voluntary Arrangement?

Anyone with personal debts over £15,000 is eligible for an IVA. All of your creditors need to agree the IVA, and you should be able to afford the monthly repayments. The amount you pay each month will depend how large your debt is, but monthly repayments are likely to be at least £200 a month. If you are lucky enough to have some equity in a home, or you own other valuable assets, you might be asked to pay a lump sum towards your debts.

Which of my debts qualify for an IVA?

Usually, you can cover all your personal unsecured debts with an IVA:

• Credit card arrears
• Personal loans
• Store cards
• Bank and other overdrafts
• Tax debts (Inland Revenue and VAT)

Which of my debts do not qualify for an IVA?

• Court fines and legal penalties
• Secured debts
• Rent
• Council Tax arrears

How much money will the IVA cost me?

Many accountants will charge nothing for setting up your Individual Voluntary Arrangement. Most charge the creditors a fee for IVA set up.

How to get an Individual Voluntary Arrangement

IVAs are legally binding? So you must use an official insolvency practitioner to propose your IVA to creditors. Insolvency practitioners are actually accountants who are specially licensed to negotiate your IVA for you.

The IVA process – what happens next?

• Your insolvency practitioner will prepare a detailed IVA proposal for your creditors.
• They base the IVA on the amount you can afford to repay, and the amount of time over which you can afford to pay it off.
• Your practitioner files an ‘Interim Order’ to prevent creditors from starting bankruptcy proceedings against, or hassling you for cash.
• Your practitioner sends your Individual Voluntary Arrangement proposal to your creditors.
• Your creditors vote on it and either accept or reject your proposal. If 75 percent of your creditors agree, your IVA immediately becomes legally binding.
• Now, you begin paying back your creditors under the terms and conditions of your IVA. If you miss repayments or fail to pay you put yourself at risk of repossession.
• Once you have paid off all the debts under your IVA, the debts are legally cleared.

Visit this handy blog for the latest news and views about Individual Voluntary Arrangements: myiva-adviser.com/blog/