Hi RBSB

You should really seek legal advice on this point as it is not necessarily straightforward - as you will see from the very technical answer that follows!

For starters, the lender may well ask you to sign something when surrendering the property to say that you accept liability for any costs and shortfall that may result. I would suggest that you should be very careful about signing such a document and, as I say, seek legal advice.

Even if you don't sign such an undertaking, I think there is a good chance that you will be pursued for any shortfall, including any costs arising from repossession and sale of the property.

Whether this would stand up in court if you refused to pay is another matter. The Bankruptcy (Scotland) Act 1985, which governs your sequestration, states clearly in section 55:

"the debtor shall be discharged … of all debts and obligations contracted by him, or for which he was liable, at the date of sequestration"

It then goes on to list a few exceptions to this rule (eg Student Loans, fraudulent debts) but secured debts are NOT one of these exceptions.

What it does say is that "The discharge of the debtor … shall not affect any right of a secured creditor for a debt in respect of which the debtor has been discharged to enforce his security for payment of the debt and any interest due and payable on the debt until the debt is paid in full"

Note the phrase "in respect of which the debtor has been discharged". So it seems that whilst the security for the debt exists beyond discharge (ie the lender can still repossess and sell the property), you yourself are discharged from liability so any shortfall should not be enforceable.

The reason I can't be unequivocal about this is that I am not aware whether this point has ever been tested in court and couldn't promise a Sheriff wouldn't see matters differently!

Hope that helps and hasn't just confused matters further.

Thanks for taking time to post Kevin, I've read your reply a couple of times, it is a minefield.The right to enforce their secured debt - that means to repossess if I defaulted on payments - is that correct? I haven't yet but anticipate I cant continue indefinitely funding repairs and

mirtgage and other costs

mortgage and other costs whilst tenants are not paying rent #128529;

That's right. They definitely have the right to repossess, sell the property and to use the proceeds to settle their debt (assuming they go through the correct legal procedures to do so obviously).

As I understand it the law says that any shortfall should then be written off, though they might try and argue differently.

RBSB

have you looked into asking your local authority to buy?

There are schemes where this might be possible in certain circumstances

Thanks PingPong
that might be an option although I expect they need to buy below value which wouldn't be likely to settle the lenders requirement

Defaults on mortgages pre sequestration, led to repossession after sequestration. Almost a year later, lender was calling to ask what my plan was for repaying the shortfall,on 2 buy to lets= 50k. I was an undischarged bankrupt and advised the debt was to be part of the sequestration and gave them my bankruptcy order number and a contact number for the firm dealing with my sequestration. I haven't heard further from them. I'm not sure what relevance that has to ongoing mortgages which are not defaulted.