Article by Richard Catlin - 16th September 2021

Last Minute Mortgage Checks

When could a non-bankrupt person be considered bankrupt? When they’re buying a house.

It’s an exciting time – you’ve finally exchanged contracts, you’ve started packing your possessions into boxes, and your new house is almost yours. Well, partly yours at least – your mortgage lender is likely to lay claim a decent chunk of it for now.

Then at the last minute, you get a call from your solicitor asking if you’re absolutely sure you’ve not been declared bankrupt recently. Cue panic stations.

Find out more about using your Credit Report to your advantage when you apply for a mortgage.

What is checked prior to completion?

When you're this close to ownership, the thought of another check might fill you with dread, least of all because so much of your information is scrutinised before your lender even decides to give you a mortgage. Rest assured; this check should be an easy one.

Your solicitor will carry out a number of conveyancing checks before you take ownership, but most of them are related to the building and the land itself. The one most likely to impact you is also one of the most important: the last-minute bankruptcy search.

The lender providing the mortgage will have checked for any record of bankruptcy against all named parties when the initial mortgage application was made (as part of their more detailed Creditworthiness and Affordability checks) but because there is usually a period of at least a couple of months between this and completion, this extra check is carried out before the funds are released.

Thankfully, in the majority of cases, this turns out to be no more hassle than signing your name, but it’s still an unwelcome and stressful last-minute shock in what is already a pretty stressful process.

How to check for bankruptcy

Anyone is free to check the Bankruptcy & Insolvency Register online, which will allow you to see matches for any name or trading name registered in the UK. It will also show you the date of birth, first line of address and the date of any bankruptcy or IVA issued. This is the same information that your solicitor will look at, so you can pre-empt any issues by checking your name and seeing what comes up.

Technically, it’s not the most advanced of systems. If your parents were cruel and you’re named something like Woody McDoorhandle – and assuming that you’ve not actually been declared bankrupt – then it’s very unlikely that anything adverse will come back.

Unfortunately, the John Smiths and Emma Joneses (anyone with a remotely common name in fact) among us might not find it quite as straight forward. Where the bankruptcy search finds people with the same (or very close) name as those being searched, it will bring them back as possible matches, even if the date of birth is different and is recorded at the other end of the UK.

Either way, as long as you’ve not been declared bankrupt, you’ve got nothing to worry about.

Can a mortgage offer be withdrawn?

If your solicitor finds a bankruptcy in your name that you have not told them about previously, the lender may retain the right to withdraw their mortgage offer. Each mortgage lender will have their own lending criteria for lending, and some lenders may be more open to offering a mortgage to someone that has been declared bankrupt in the past than others, especially if the bankruptcy was discharged sufficiently long ago.

For this reason, if your mortgage lender asks you at any point during the application if you’ve been declared bankrupt in the past, it’s your legal duty to disclose this information. This is usually one of the first things a lender will ask you, and being upfront as early as possible will help save you a whole heap of trouble when it comes to pre-completion checks.

‘Passing’ the pre-completion bankruptcy check

The only way to 'pass' the bankruptcy check is to not have been declared bankrupt. If you can honestly say that your bankrupt namesakes are not in fact you, it really is as simple signing the results or confirming to your solicitor that none of the records actually relate to you. Your solicitor will in turn supply this to the lender, and everyone should be happy – you especially.

If you’re thinking of applying for a mortgage – or any form of credit really – in the near future, then you can reduce the anxiety involved by checking your Credit Report online beforehand. Should anything crop up that you think is incorrect, it’s better to find out and do something about it in advance than to discover the bad news when a lender politely declines your application. Forewarned is truly forearmed.

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Updated by Sam Griffin on 16 September 2021

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