Katie Price was declared bankrupt this week. This came following the former model and TV personality failing to keep up with her payments on an Individual Voluntary Agreement (IVA) set up late last year.
Once said to have been worth around £40m, the star was declared bankrupt by a judge at a specialist insolvency court in London.
It isn’t the first time financial woes have hit a celebrity, and it certainly won’t be the last. But when it happens to a rich, successful celeb, it highlights just how vulnerable we all are to potential financial trouble.
So, what are your options for getting a mortgage when this happens?
Although it may come as a surprise to many, it is still possible to get a mortgage despite the difficulties that bankruptcy brings.
Bankruptcy is a serious financial problem which can cause real trouble with most mortgage providers.
While there are many lenders who will flat out refuse your application if you have a bankruptcy on your file, there are a selection of specialist lenders, and even mainstream mortgage providers, who are happy to consider mortgage applications from people who have been declared bankrupt.
If, like Katie, you’ve been declared bankrupt, you won’t be able to apply for a mortgage, or any line of credit, until you’ve been discharged.
Discharge happens at the discretion of a court, although the bad news for Ms Price and others in her boat is that it’s usually at least a 12-month period before you might expect to receive one.
Once you have your official discharge, it takes several months, or even years, of good financial conduct before lenders will start to trust you as creditworthy again. Naturally, the longer it is since your discharge, the more lenders will be well-disposed to consider your application to borrow.
How to improve your chances
If you’re keen to get back on an even financial footing and want to arrange a mortgage at the earliest possible time, your best bet is to save for a healthy deposit. If you get a discharge and wait just 12 months, with a 40% deposit ready to put down, you’re more likely to find a lender willing to accept your application.
Generally, the longer you can delay between having your bankruptcy discharged and applying for a mortgage the better your odds of success, and a decent rate to boot.
If you’re able to bide your time, once your discharge is official, waiting a full 6 years before applying could result in mortgage acceptance with as little as 5% deposit in hand.
Can Katie bounce back?
Right now, Katie Price may be working with her accountants to figure out whether she has enough assets to get her bankruptcy annulled, which can be possible in some circumstances.
In order to annul, or cancel, her bankruptcy she would have to raise enough capital from her assets to pay her debt, along with any associated expenses, in full. If she and her team find a way to do this, they will then have to return to court in the coming months.
If you’d like to talk to someone about getting a mortgage with bad credit, the experts we work with are whole-of-market advisors with a proven track record of helping people turn things around.
Call 0808 189 2301 or make a quick online enquiry for a free, no obligation chat and we’ll match you with an expert experienced in helping customers in similar circumstances.
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